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How Many Stocks Should You Own?

Rebalance OptionsEarly on in your investing journey, the number of stocks is not really a concern but as your portfolio grows, you start thinking about how many different stocks you should have. There is a tendency to set a fix amount per holding and then adding more holdings as a way to limit your exposure to a company. However, you need to be able to adjust those values as you grow your portfolio.

A factor that is pertinent to deciding on how many stock is how much per stock do you want to have. You can’t just put a really small amount with your discount broker since the fees are going to eat up your funds. Obviously, discount brokers are now offering low trading fees compared with just 5 years ago. There are no reasons to pay more than $10 per trade nowadays.

Related: Discount Broker Overview for Dividend Investor

There are different ways to look at how much you should have in a stock.

  • You want to DRIP the stock so you put enough for the dividends to cover the purchase of new shares.
  • You want equal exposure for simplicity and balancing
  • You want to limit risks on some of your selection

Portfolio Size Matters

The size of your portfolio does matter. If you have $100,000 in your portfolio, chances are you are increasing the size of your holdings compared with someone starting with a $10,000 portfolio. The same applies to someone who has $1,000,000. Back in 2009 when I bought the Canadian banks at less than half their current value, I still only bought $10,000 while my parents bought for over $50,000. At some point, the size of the money you talk about becomes relative.

With the size of my portfolio, I tend to invest between $4K and $6K per stocks. When a holding reaches $8K through appreciation, I may sell some to rebalance or initiate a new position. That holding size is currently the sweet spot for me but I can see it going up to the $7K and $8K in the near future to avoid just adding new position to my portfolio.

Related: How to invest with little money

Rule of Thumb on Number of Stocks

If you can’t follow all the companies you invest in, how do you know they are still good investments? I invest for the long term and I work on selecting companies that have an moat in their market with the ability to sustain it. I also need to understand the business of the company and be able to explain it to my kids. If I can’t, it’s too complicated for me.

Related: Why Dividend Investing?

My Magic Number

I have a total of 32 individual stocks. However, all the Canadian banks are somewhat the same to me. Rather than invest in just one, I went wide to avoid too much exposure to just one bank. I also own the four big telecoms in Canada as a way to diversify across them. I know Buffett has a different approach :) I am not done with my diversification in the US so I am sure to pick up more holdings in the US for my RRSP. For my Canadian investments, I have covered a large number of them so far. Even though I have share in some companies, it doesn’t mean I have a lot. I am not holding a lot of shares with the life insurance at the moment for example.

My number is between 40 and 45. If I fill the need to add an extra holding, I will look at consolidating other positions.

Readers: What’s your number?

Image: Master isolated images / FreeDigitalPhotos.net

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19 Responses to "How Many Stocks Should You Own?"

  1. krantcents says:

    I have just 17 investments. I have just 5 stocks and the rest are mutual funds and ETFs.

    • That seems a bit excessive to me. 12 different mutual funds/ETFs. If that’s all under one account I’m sure you can consolidate that. However if it’s between a 401k, IRA and taxable account I can see where you could easily hit that number.

    • @krantcents
      That’s very interesting. As JC says, do you happen to have overlaps between mutual funds and ETFs? I do understand that sometimes employer accounts have limited choices too.

  2. I’m with you. I think 40 or so is the magic number.

    I intend to own about 30 or so in Canada and about 10 or so from the U.S.

    Once that portfolio is built, and all those stocks are DRIPping, the retirement plan will be fully in gear. I figure I’m about 5 years away from making that happen. I suspect with your diligent saving and investing plans, you’re very close to that as well.

    Kudos to you, 32 investments. Nicely done.

    Mark

    • @My Own Advisor
      I am with you. Around 40 is good. I find it hard to stick to just one Canadian bank for example. They are all good and all have their different entry points. It adds up the count but it’s really just one bucket for me.

  3. EnnsDS says:

    I personally don’t like to own more then say 15 stocks. I’m more in the Buffett camp in that I have 2 to 4 stocks with a bigger % based on the fact they have a long term history of out performanceand a bright future, maybe a `wide moat` type stocks, and then I have a number of stocks at about half the amount of the top stocks. I try to stick with quality names, but I do diversify in sectors, I’ll take 2 banks, 2 pipelines, 2 utilities, 2 consumer staples etc… though sometimes unique opportunities come along. Hey Passive, since you own all the banks, do you think it may be easier fee wise to just own the big bank etf here in canada

  4. Robb says:

    I currently own 16 stocks and I think the sweet spot for me is about 25. I’d rather invest more in the solid dividend growers that I already own than keep scouring the market to find a company that’s not the best fit for my strategy.

  5. I’m currently around 32 and eventually I’m thinking closer to 40. For now though I’m trying to focus on adding to current positions, of course if the right situation comes along that could change.

  6. Bernie says:

    I’m retired but don’t need income yet from my portfolios. My RRSP currently has 20 holdings comprised of 18 stocks, 1 REIT & 1 CEF. The mix is roughly 60% Cdn, 30% US & 10% Int’l. I weight each holding equally by income, both overall and monthly. I’m still accumulating and am aiming for about 30 holdings.

  7. Great topic.

    I think around 45 or so is right for me. Any more than 50 and it starts to get unruly. I never thought I’d own more than 45, but I’m already up to 36 equity positions and I don’t even own a piece of high quality companies like KMB, UL, DEO, XOM, RY, RDS.B, BDX, GIS, NSRGY, SO, ADP, ADM, CL, LMT, CLX, UTX, TGT or USB yet. So I almost wonder if I’ll end up at 50. We’ll see!

    Best wishes!

  8. farcodev says:

    I currently have 10 and plan to increase it toward 12/13.
    But it always depend on the valuation at one time and its linked price.

  9. I’ve always heard that if you have more than 30 you probably aren’t really adding to your diversification and are just increasing your maintenance time and fees (transactions).

    I plan to mostly be investing in SPY.

    • @Derek
      I agree. I don’t think you need more than 15 to be diversified. However, after being diversified, how much exposure do you want in one stock? If you have 1 million invested, do you have $100K per investment? do you spread the $100K across of few stocks in the same sector?

      For example, which utility should you buy? instead of trying to pick between EMA, FTS and CU, why not just hold the three since they actually serve different sectors anyways. Just a thought …

      I am not adding more stocks but I am actually curious about doing consolidation.

  10. EnnsDS says:

    That is true. If your doing your homework, you don’t really need more then 15 to 20 stocks max(I would not go past 15). The guys with 30, 40, 50 stocks or more are really only increasing your fee’s and also creating more of an average return. You may as well just buy a couple ETF’s, get the same diversification or better, pay less fee’s, not have to make individual stock decisions, and get the same average return.

    • @EnnsDS

      I would not say that my 30+ stocks are close to an ETF at the moment. I can see myself holding 15-20 Canadian stocks but there are many US stocks necessary to complete diversification. In fact, I think it easier to have 15 stocks if they could all be US stocks. Unfortunately, I need to have Canadian stocks to better manage income tax. I am not looking at adding though.

      I liked to have the 5 banks instead of picking which one is best … Same thing with the telecoms.

      Here is another question, do you manage your diversification separately per account? What does everyone do?

  11. JeromeNL says:

    I have 14 positions, all stocks. For me that is about the right number. I like to study and know the companies I own intimately and I find that with 14 or 15 that is just possible. I invest equal amount of money per stock and the amount slowly rises over the years. If an individual stock doubles I will rebalance by selling half of it and using the freed money to raise the amount invested per stock. I don’t drip directly but use the dividend to buy those stocks in my portfolio which have gone down. Thus only buying when stock are cheap.
    This strategy is the end-result of more than 30 years of investment, starting when I was 16. I think I have made most mistakes there are and my present system feels best to me.

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