Having discussed some of the various risk in our previous article, so how do we actually minimise such risks?

Personally, I believe the key to minimising such risks is through diversification by holding approximately 20 to 30 stocks in the portfolio. I do understand that there are many investors who prefer taking concentrated positions, putting their money in a few of their best ideas. Buffett probably helped popularize this idea by focusing on his “twenty punch card rule”, while Charlie Munger  is famously known for saying that 3 stocks is enough. However, how confident and experienced are we to really just take on a portfolio of say 5 companies?

Imagine the case of a portfolio consisting of 5 companies versus a portfolio consisting of 25 companies. This translates to a 20% and 4% capital allocation for each case respectively. While it is true that if we are right in our investment …