You may have wondered about this question before.
How many stocks should I own to be “sufficiently diversified”?
You may have gotten advise from people (especially the finance professionals) advocating the importance of diversifying your portfolio.
Because: “Having too little stocks is risky.”
On the other hand, you may have probably also heard others stress about the importance of holding only a handful of stocks (not more than 5).
Because: “You would not have time to understand and monitor so many stocks.”
So…who is right?
I admit, this is not an easy question to answer.
In fact, I would like you to answer more questions:
- Do you want to be rich, or are you happy with accumulating wealth steadily?
- Do you have the temperament required to be rich?
Warren Buffett’s Secret
Many people believe that Warren Buffett became rich because of his phenomenal stock picking ability.