Building A Portfolio: How Many Stocks Should I Own | FAST Graphs
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- เผยแพร่เมื่อ 29 ก.ย. 2024
- One of the most asked questions I receive from investors is: how many stocks should I own or hold in my portfolio? Or, they might ask: how diversified should my portfolio be? On the flip side, I have had investors tell me that they would not be comfortable owning less than 50 stocks. I even had some say that they wanted at least 150 stocks in their portfolio. Frankly, I do not believe there is a “correct” or right answer to those questions. Similarly, I do not think people who are suggesting they need a lot of stocks in their portfolio are wrong either.
On the other hand, there are some practical and/or mathematical realities that investors can use as guides. For example, what about weightings. Should you overweight certain stocks and underweight others? Recent academic studies suggest that once you get past 16 stocks you have used up most of the benefit of diversification. Other studies indicate that a portfolio of approximately 30 stocks is optimum. Personally, I believe the right number is heavily predicated on the psychology and risk profile of the individual building the portfolio. People who are very risk-averse would need more stocks versus people who had a higher tolerance for risk.
Nevertheless, there are many approaches that can be taken and/or implemented to build a portfolio that is just right for you. Although I am sharing only a couple of examples with this video, the options are virtually endless. Therefore, with this video I am simply encouraging you to think about your options without overthinking it. Furthermore, the number of holdings is far from the only consideration of risk that investors should worry about. Other things such as opportunity cost, the investor’s specific needs, and of course my favorite relative valuation of stocks that you might be considering.
With this video I will go over $LAD Lithia Motors, $TREX Trex, $NFLX Netflix, $TCEHY Tencent Holdings, $ULTA Ulta Beauty, S&P 500
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I know it's an old video, but I want to say that it's a golden video with many valuable tips. I created recently a 14 stocks portfolio in which I hold at least 1 company in each sector (from Basic Materials to Utilities) and I try to balance it out between Defensive, Sensitive and Cyclical as much as I can with companies I deem undervalued. I also put a rule for myself that they must be a company that pays dividend and I can't hold more than 1 company from the same sector unless it's from a different country (for example I have JPM and BNS in the financials, 2 banks stocks from 2 different countries). Is it a perfect portfolio...maybe not, but it does make me sleep well at night knowing that I have coverage in every sectors with companies that I researched on Fastgraphs that I judged not only to be undervalued, but good growing companies with a good track record.
I own 10. Bank stock, REIT stock, defense stock, 2 staple stocks, pharma, industrial stock, grocery store stock, oil stock, and 1 technology stock.
I’m doing exceptionally well and this suits my needs quite well.
Own the best stock in a sector and be done with it.
Every time I buy I just buy the stocks that are currently dipping. This is a solid way to accumulate wealth.
I like your style!
thanks Chuck !
Hey Chuck - lynch like turnarounds. Might be cool for you to show a basket of stocks that have already turned around and show on fast graphs how you could’ve track those fundamentals in real time. Great video as always
"Diversification is the only free lunch" - unknown author
50% in 10 ETFs to "own the world".
20% in 10 "high conviction stocks".
30% cash to buy ETF when the market tanks 30%/40%/60% with buy limits at these levels always in my brokerage account.
Another great video. I normally equal weight 20-25 positions but will overweight certain opportunities when they come. Only 5 stocks I would need ultra high conviction on each but those concentrated returns can be amazing
Grandpa is amazing. Much appreciate your videos!
I want aggressive growth with zero risk 😆
lol, my IRA portfolios have 70-something stocks.. Many were from spinoffs, also I like to buy extremely undervalued cos. My answer to monitoring them is ignore any stocks that are < 1% of total. My top eight stocks are ~1/3 of port value. I won't beat an index over time, but I receive a lot more div yield than the index. Works for me....
land : like a said there is no right or wrong answer. Congrats on building a portfolio that's working for you. regards, Chuck
@@FASTgraphs Thanks, Chuck. Fastgraphs has been absolutely invaluable in constructing and maintaining my retirement port over years. I couldn't invest in cos. without a visual guide that changes with time frame, along with all the pertinent written data. Without it to me would literally be like driving to a strange place without a road map or GPS. Thank you for a wonderful tool and these super instructional videos.
you are the best!
Growth portfolio is cool but scary (but I like the idea)
Hi Chuck, I would like to build a dividend portfolio. Do you have any service where you provide guidance and advice what to buy? Thanks you sir.
Titian Tower: unfortunately I do not offer a specific service that you asked for. However, Premium subscriptions to FAST Graphs provide features that allow independent investors to easily identify high-quality dividend paying stocks trading at fair value. Go to our website www.fastgraphs.com or email my associate Polly and she can give you some suggestions. pollyc@fastgraphs.com
Very interesting, thanks. I actually don't care about diversification by sectors or anything, I just buy the stocks I like and/or stocks that are fairly priced or undervalued. I usually have around 45.
Thank you for this wise counsel. Currently here our retirement accounts hold 28 equities and four mutual funds (in accounts where buying equities directly is not an option). Long-term dividend income investor hoping not to have to sell equities very often, if ever.
The moral of the story is, this video is going to be saved to my investing playlist! great video
I believe what Chuck describes is called the "Core Satellite" portfolio. Thanks for the "AAA rated Investment Grade Lessons" you so often provide. I enjoy your content sir and for that I thank you.
Does fastgraph cover Uk stocks or global ETFs 🙏
Thank you for the video. My question is this. Imagine i want to have a 20 stock portfolio with 5% allocated to each. I have 20 companies I like all more or less at 5% and all bought at lower valuations. Imagine non of my companies is undervalued now. Do i just save my regular amount and wait in cash? Do I buy a 21th company?
Thanks Chuck, I appreciate so much sharing your videos, your experience and insight with us. In case you had the chance could you please analyze Vistra (VST), it is a Texas based utility stock owned by Brookfield and Howard Mark's Oaktree, it came from bankruptcy and perhaps it is a good deal for a very patient investor, all the recent issues in TX and a loss foretasted for this year opended a long term buying opportunity IMO. Greetings and thanks again
Chuck
I’ve been a dividend investor since 2013 I’m 28 and it has been not as fun as trading crazy names etc but I’ll tell you my portfolio does much better then my friends overtime that claim to be “ traders “ and I’m only getting better with chuck the dividend kings and fast graphs.
I notice that LAD is highly overvalued when viewed on FAST graphs in the full historical range, but well within the green zone when viewed over 13 years @ 9:25.
But it seems it still might be overvalued compared to its historical relation to normal PE Ratio.
Tuckerman: Your observations are essentially correct. However, it all comes down to growth rates. The full historical growth rate is 13.08% which utilized a 15 P/E ratio as a valuation reference. Also, as you noted the normal P/E ratio was 13.35 on the full historical graph. Nevertheless, when I shortened the graph the earnings growth rate was 30.44%, therefore, utilizing the P/E ratio equal to earnings growth rate formula the orange line on that time frame represented a multiple of 30.44.
However, notice that the stock never traded at that high multiple. Over this timeframe the normal P/E ratio calculated 14.03, which is essentially within the same range (13.35) that was on the full history graph. Stated differently, I would say that a fair valuation range would be a P/E ratio of 14 to 16 which is validated on the graph. Valuation is never precise and therefore should always be looked at as within a reasonable range of value. Regards, Chuck
@@FASTgraphs, thanks for your informative reply and powerful visualization tools!
In a timeframe of 2015 - 2023 Amazon's share price looks fair, 2015 -2021 is slightly undervalued, but almost any other looks overvalued. Seems difficult to judge AMZN. Makes you wonder if cases like Apple will become like Amazon, being overvalued in most contexts long-term. But Apple now looks much more out of whack with fundamentals.
Wow didn’t expect that!
You do amazing work with FastGraphs and your articles/videos are extremely educational and valuable too.
Thanks a lot again!
Error, the 1m grew to 4 ...not 2 to 4 like u said at 10:00
Mark: thanks for your comment. However, I respectfully submit that you misconstrued what I was saying. My point was that by investing half the money ($1 million) into the S&P 500 would have grown to $4 million where 4 million dollars equaled twice the $2 million total portfolio.
In other words, the S&P 500 portion would have generated what would've equated to approximately a 7% return on the total portfolio. Here I was metaphorically implying if the $1 million invested in the 5 growth stocks went to 0 the S&P 500 produced the risk mitigation that it was designed to do. So you are correct the 1 million did grow to 4 million. However, to repeat, the reference of the 2 million going to 4 million was simply suggesting a successful outcome even if the growth stocks would've been a disaster. Thanks again, Chuck
@@FASTgraphs oh i see...btw fastgraphs subscriber here i use it daily!
👍
Great!
10 well researched & either undervalued or close to fully valued companies, are all the stocks you need to own.
I'm talking about companies that are between $1 billion & $50 billion in market cap and that are not trading at 40X sales because some salesperson of the moment is using fancy adjectives or phrases to "sell you" on the idea of gambling.
You want to build a portfolio that will outperform an index over time (because if you don't, why bother to invest in anything other than an index?) and also, not have as big a draw downs as the index during bear markets.
100% agree
Fractional shares and Value orders mean you can peel off small amounts from your Rips and open new positions easily, this way you compound horizontally, it's far from optimal though, but it's a decent way to squirrel profits and grow your portfolio
Once again a good video especially for someone just starting out. The question is knowing that you cherry picked your examples, which ten growth stocks would you pick today given your knowledge and magical tools. I plan to view your video tomorrow with great anticipation.
Rohrshack: Thanks for the suggestion. Unfortunately, there are subscriber requests that are in front of yours. However, I do plan on routinely covering intriguing looking at growth stocks that appear fairly valued based on their growth potential.
Here is an example of one I produced previously: th-cam.com/video/diGb22tat-0/w-d-xo.html
3 of the 4 stocks I showcased have done well, but one not so much. This highlights the risk of investing in high growth. Nevertheless, I will be covering growth stocks and I am even considering making it a weekly feature. I also plan on doing a weekly feature on fairly valued dividend growth stocks. Thoughts?