Every Wednesday, we publish our “Investor Toolkit” series. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific investment advice. Each Investor Toolkit update gives you a fundamental piece of our investment strategy, and shows you how you can put it into practice right away.
Tip of the week: “Too many stocks can hurt your returns.”
The right number of stocks for you to own depends in part on where you are in your investing career.
The beginning investor: When they’re starting out, most investors have modest amounts of money to invest. Even so, our investment advice is that you should invest at least several thousand dollars at a time, even if this means you can only buy a handful of stocks. Otherwise, your broker’s minimum commission will work out to too high a percentage of your investment on each purchase.
Pick at least one stock from each of the 5 sectors. At the outset, you should aim to invest in a minimum of four or five stocks. Our investment advice is to pick one from each of most, if not all, of the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; and Utilities).
You can buy them one at a time, over a period of months or even years, rather than all at once. After that, you can gradually add new stocks to your portfolio as funds become available, taking care to spread your holdings out as we advise.
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Add new stocks as your portfolio’s value increases. When your portfolio gets into the $100,000 to $200,000 range, you should aim for perhaps 15 to 20 stocks. If you’re married, it’s best to treat your family holdings as one big portfolio, even if you and your spouse keep your money separate. That way, you can be sure you aren’t operating at cross purposes, or investing too much of the family fortune in a single area.
Our 3-part investment advice is key. When you get above $200,000 or so, you can gradually increase the number of stocks you hold. When your portfolio reaches the $500,000 to $1 million range, 25 to 30 stocks is a good number to aim for.
Of course, you may fall a few stocks below that range, or go a few above it, particularly when you’re making changes in your holdings. That won’t matter if you follow our three-part investment advice: invest mainly in well-established companies; spread your money out across the five main economic sectors, and downplay stocks that are in the broker/public-relations limelight.
Our upper limit for any portfolio is around 40 stocks. Any more than that and even your best choices will have little impact on your personal wealth.
You can get our latest analysis, including our clear buy/sell/hold advice on dozens of Canadian stocks you may be considering buying in The Successful Investor. What’s more, you can get one month free when you subscribe today. Click here to learn how.
Comments
Steve
Selecting a diversified portfolio with stocks spread across the five sectors is good advice for non-professional investors. However, advising them to hold 15-20 stocks is not good advice unless a home investor wants to do it almost full time.
I have been significantly “beating the street” for the last two years and can tell you with certainty that it requires on average 1 hour per week per stock to properly choose and monitor the stocks in a diversifed portfolio.
I would suggest that most of your readers don’t have the time or the desire to spend 15 to 20 hours or more per week doing the homework required to properly manage their portfolio. They would be much further ahead to keep their portfolio to at least 5 and at most 15 stocks according to how much time they can spare.
I respectfully request that you modify your advice to your readers to refect the above.
Many of our readers are happy with the results they get from applying the advice in our newsletters, and they spend substantially less than an hour per week per stock. But thanks for commenting.
I’d be grateful to any other readers who care to share their views on this subject.
This may sound like a commercial but I believe Pat helps us support the number of stocks that he recommends. In every issue of his magazines there is a pretty thorough fundamental analysis of all the stocks he follows. And in the weekly updates he generally gives an interpretation of news relating to the companies he follows.
Now, you will still want to follow things yourself. But, it seems this makes life a lot easier.
I find Pat useful, as well, because of his experience and particular abilities in evaluating stocks. I find that many amateurs, even knowledgeable amateurs ( in which group I include myself) don’t really have the expertise to really understand what the ratios really mean. Sure, at a an elemtary level we can. But, there is a lot more to it. I find that a lot of amateurs spend hours on analysing the fundamentals and when I compare them to what Pat says, there is a world of difference. Also, amateurs tend to feel that we are better stock pickers than we actually are.
Whew, that was a mouthful! But, in short I think that Pat helps us to monitor this many stocks.
My problem with keeping the numbers of stocks down is that after one has committed to, say a conservative growth portfolio, one also wants a few growth stocks.
and also, how does one judge between various candidates. Think here, for instance, of Enbridge and Transcanada Pipeline.
One may be a better buy at one moment than the other. Therefore, wouldn’t it be a good idea to hold the two and add to either one when the time is right?
We have found that with this market volatility our stocks dropped substantially therefore
we cannot sell at this time. We need a portfolio review first and foremost before deciding on which
type of assistance ie. newsletters and so on would prove most appropriate for us now. I am certain that many people are in the same boat as us since we are the buy and hold type of investors.
Thanks to all for the comments and praise. Joe, your accolades are especially appreciated.
Rena, I am not sure if you are aware that we also have a Portfolio Management Division at The Successful Investor called Successful Investor Wealth Management. It may be worth your while to contact Pat and his team of Portfolio Managers if you are interested in a Portfolio review . . . something we highly recommend.http://www.tsinetwork.ca/portfolio-management-services/
Thank you all for using our service and for your comment which are so important.
Mindy Tenenbaum
Chief Marketing Officer
The Successful Investor Inc.
As already said by another perons:
Selecting a diversified portfolio with stocks spread across the five sectors is good advice for non-professional investors.
However, how does one determine in which of the 5 sectors, EDFs are found?
For example CDZ,CGR,CUD,CYH,FIE, and
BOND FUNDS,XCB, HYG
Alhough some are mostly in one sector, like FIE, others are move diverse
As already said by another person:
Selecting a diversified portfolio with stocks spread across the five sectors is good advice for non-professional investors.
However, how does one determine in which of the 5 sectors, EDFs are found?
For example CDZ,CGR,CUD,CYH,FIE, and
BOND FUNDS,XCB, HYG
Alhough some are mostly in one sector, like FIE, others are more diverse
To determine how a particular ETF should fits into a diversified portfolio strategy, you should look at the individual stocks held within that ETF and how they break down across the 5 sectors.
That’s part of our analysis when we look at ETFs in our Canadian Wealth Advisor Newsletter.
Learn everything you need to know in
'The Canadian Guide on How to Invest in Stocks Successfully'
FREE Special Report from The Successful Investor.
How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.
Get Your FREE Report Now:
How to Invest in Stocks Successfully
X No, I don’t want to make big money in the stock market.
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Selecting a diversified portfolio with stocks spread across the five sectors is good advice for non-professional investors. However, advising them to hold 15-20 stocks is not good advice unless a home investor wants to do it almost full time.
I have been significantly “beating the street” for the last two years and can tell you with certainty that it requires on average 1 hour per week per stock to properly choose and monitor the stocks in a diversifed portfolio.
I would suggest that most of your readers don’t have the time or the desire to spend 15 to 20 hours or more per week doing the homework required to properly manage their portfolio. They would be much further ahead to keep their portfolio to at least 5 and at most 15 stocks according to how much time they can spare.
I respectfully request that you modify your advice to your readers to refect the above.
Hi Steve,
Many of our readers are happy with the results they get from applying the advice in our newsletters, and they spend substantially less than an hour per week per stock. But thanks for commenting.
I’d be grateful to any other readers who care to share their views on this subject.
Thanks,
Pat
This may sound like a commercial but I believe Pat helps us support the number of stocks that he recommends. In every issue of his magazines there is a pretty thorough fundamental analysis of all the stocks he follows. And in the weekly updates he generally gives an interpretation of news relating to the companies he follows.
Now, you will still want to follow things yourself. But, it seems this makes life a lot easier.
I find Pat useful, as well, because of his experience and particular abilities in evaluating stocks. I find that many amateurs, even knowledgeable amateurs ( in which group I include myself) don’t really have the expertise to really understand what the ratios really mean. Sure, at a an elemtary level we can. But, there is a lot more to it. I find that a lot of amateurs spend hours on analysing the fundamentals and when I compare them to what Pat says, there is a world of difference. Also, amateurs tend to feel that we are better stock pickers than we actually are.
Whew, that was a mouthful! But, in short I think that Pat helps us to monitor this many stocks.
My problem with keeping the numbers of stocks down is that after one has committed to, say a conservative growth portfolio, one also wants a few growth stocks.
and also, how does one judge between various candidates. Think here, for instance, of Enbridge and Transcanada Pipeline.
One may be a better buy at one moment than the other. Therefore, wouldn’t it be a good idea to hold the two and add to either one when the time is right?
Joe
We have found that with this market volatility our stocks dropped substantially therefore
we cannot sell at this time. We need a portfolio review first and foremost before deciding on which
type of assistance ie. newsletters and so on would prove most appropriate for us now. I am certain that many people are in the same boat as us since we are the buy and hold type of investors.
Thanks to all for the comments and praise. Joe, your accolades are especially appreciated.
Rena, I am not sure if you are aware that we also have a Portfolio Management Division at The Successful Investor called Successful Investor Wealth Management. It may be worth your while to contact Pat and his team of Portfolio Managers if you are interested in a Portfolio review . . . something we highly recommend.http://www.tsinetwork.ca/portfolio-management-services/
Thank you all for using our service and for your comment which are so important.
Mindy Tenenbaum
Chief Marketing Officer
The Successful Investor Inc.
As already said by another perons:
Selecting a diversified portfolio with stocks spread across the five sectors is good advice for non-professional investors.
However, how does one determine in which of the 5 sectors, EDFs are found?
For example CDZ,CGR,CUD,CYH,FIE, and
BOND FUNDS,XCB, HYG
Alhough some are mostly in one sector, like FIE, others are move diverse
As already said by another person:
Selecting a diversified portfolio with stocks spread across the five sectors is good advice for non-professional investors.
However, how does one determine in which of the 5 sectors, EDFs are found?
For example CDZ,CGR,CUD,CYH,FIE, and
BOND FUNDS,XCB, HYG
Alhough some are mostly in one sector, like FIE, others are more diverse
Hi Ivo,
To determine how a particular ETF should fits into a diversified portfolio strategy, you should look at the individual stocks held within that ETF and how they break down across the 5 sectors.
That’s part of our analysis when we look at ETFs in our Canadian Wealth Advisor Newsletter.
Thanks for your comment.
Alex Conde
Online Editor
TSI Network