This Content Is Only For Subscribers
Some investors feel proud in holding a large number of stocks in portfolio. If you are one of them, look at the associated problems that occur from having such portfolios.
Whether you are following any expert’s advice or not, it is very essential to track all stocks in your portfolio at regular intervals at least once in a week. Tracking does not mean checking stock price daily. You should follow quarterly result, all business related news, competitor’s status, management interview, conference call and all this will require at least 30 minutes per week in a single stock. Now if you have 60 stocks in y9ur portfolio, it will require 1800 minutes or 30 hours per week, around 4 and half hours per day. Now for a working individual, it is not possible to devotee 4 and half hours daily after his full time job/business.
Suppose you have 60 and more stocks in your portfolio. Amounts them if 4-5 stocks generate 100% annualized return then also your overall performance would be that good. Negative/flat return from other poor quality stocks may minimize the gain. Always remember that the number of high quality stock is always much lesser that the poor quality stocks. Great investment opportunities are rarely available. So if you have 60 and more stocks in your portfolio, here is a very high probability that many of those companies have poor fundamentals.
World’s most successful billionaire investor, Mr. Warren Buffett have always preferred to keep 10-15 stocks in his portfolio. Despite having 40-42 stocks. Mr. Rakish has restricted 90% of his holdings to 10-12 stocks. Now the question comes, how many stock are sufficient to hold at a time? The answer varies from investor to investor. On an average, retail investors should hold 10-20 quality stocks in their portfolio at a time. For highly informed sophisticated investor, the number may become more but the major portion should be restricted to 10-20 stocks. If you are a full time investor and can dedicate 8-9 hours a day, then active tracking of 50-60 stocks would be an issue.
