When investors are just starting out, they typically have modest amounts of money to invest. You can start your stock portfolio with as little as $10,000, say, but keep in mind that the less you invest at any one time, the higher the percentage your broker’s minimum commission takes from each trade.

(Starting and building a portfolio, and how many stocks you should own at each stage of your investing career, are just two of the stock market basics we explore in our free report, “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada.” You can get a copy absolutely free. Click here to claim yours now.)

Stick to these stock market basics as your portfolio grows

You should aim to invest initially in a minimum of four or five stocks — one from each of most, if not all, of the five main economic sectors (Resources & Commodities, Finance, Manufacturing & Industry, Utilities and Consumer).

You can buy them one at a time or over a period of months (or even years), rather than all at once. After that, you can gradually add new names to your portfolio as funds become available, taking care to spread your holdings out as we recommend.

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When your portfolio gets into the $100,000 to $200,000 range, you should aim for perhaps 15 to 20 stocks.

The mature portfolio: 40 stocks is a good upper limit

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 to your holdings. That won’t matter if you follow our three-part prescription of mainly investing in well-established companies; spreading your money across the five main economic sectors; and downplaying stocks that are in the broker/public-relations limelight. It’s one of the core strategies you’ll read about in “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada.”

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.

Avoid diluting your profits by limiting the number of mutual funds you hold

Some investors prefer to hold stocks through mutual funds. However, many fund investors routinely hold more than 40 stocks through their fund holdings. That’s because they often invest in 10 or more individual funds, any one of which may hold 50 to 100 stocks. There’s a lot of overlap in stocks between funds, of course, but this still represents far too much diversification. That’s why we continue to recommend that you hold no more than five funds.

When you hold more, you spread your money out too thinly and condemn yourself to mediocre results, at best. The best you can hope for is a long-term return that more or less equals the market, minus the average MER (the yearly cost of investing in most funds) of 2.5% to 3%. Mind you, that’s what you get if you invest only in well-managed funds.

As a member of TSI Network, you may have already seen Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada. If you haven’t yet read this new free report, click here to download your copy today. I’d also encourage you to share the report with a friend. It’s my “thank you” just for signing up for my free daily updates.