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In today’s #AskDrWealth series, I am going to address the most popular question from our readers and students.
“How Many Stocks Should I have In My Portfolio?”
Which Is Better? – Diversified portfolio or Concentrated Portfolio
Let’s imagine that there’s Investor A and Investor B, with different types of portfolio:
- Investor A has a portfolio of 5 stocks (concentrated)
- Investor B has a portfolio of 30 stocks (diversified)
Let’s assume that both portfolios are equally weighted.
This means for A, each stock represents about 20% of the portfolio while for B, each stock represents about 3%.
- Investor A: 100% / 5 stocks = 20% per stock
- Investor B: 100% / 30 stocks = 3% per stock
At a quick glance, inexperienced investors would think that having 5 stocks is better than …