When investing in stocks the main questions are: How much to put in a stock depends on the stock. How much in cash depends on the risk and reward of your investments. How many stocks should you have. Be flexible.
Stock Market Portfolio – How Many Stocks And How Much Cash!
Lee Ainslie's Maverick Capital had a difficult third quarter, although many hedge funds did. The quarter ended with the S&P 500's worst month since the beginning of the COVID pandemic. Q3 2021 hedge fund letters, conferences and more Maverick fund returns Maverick USA was down 11.6% for the third quarter, bringing its year-to-date return to Read More
Good day fellow investors. How many stocks would you have in your portfolio and what should be the maximum exposure. This is a great question that came from Fabian sent Would you mind doing a video on portfolio location educating half of the portfolio. Not to over diversify and have a positive impact in case of upside but not so much to avoid catastrophic loss is 10 to 15 percent max Saffir portfolio value. What you have been using in your past personal portfolio. So this is such an important question because you have to eliminate the problems that might come from a fixed and flexible investing mindset. And on the other hand have some structure to lead you to whatever might happen in the stock market. Usually a stock goes up 50 percent and falls for Terfry percent. You ring a year that’s normal. The stock market even the biggest companies do that like Apple. So there will always be big changes in your portfolio especially if you have a small number of stocks. Now you can decide OK Warren Buffett says that diversification is for fools. However on the other hand bitter Lynch always had more than 50 100 big positions in his portfolio and other 100 small positions. So first the decision is OK what’s my strategy. Am I going to focus on a few great businesses great value investments and I’m going to be sure especially if it’s value investing.
It’s much easier and you know OK I’m going to get the return eventually so you can have a smaller number of positions if you you’re more like Lynch that follows the market follows the earnings follows the trends follows what’s going on tries to find those undiscovered gems. Then you might say OK I’m going to have 100 positions because if Of those 100 one is the next Amazon then I will get a 200 bagger out of just that one stock that will cover for all the portfolio. So first what’s your craft. The site is what’s my strategy. A lot of stocks and then I’m going for the Jack bought 25 baggers or something or just a few carefully analyzed assess risk reward investments and then you go with a lower number. I am not so much inclined into a lynch. I like his strategy but I like to apply also strategy on my 5 to 7 10 holdings. I think with the number of holdings I will go up to 7. And when I come to 7 I’m currently at 5 still researching then I’ll use John Templeton’s advice to sell only when you find something 50 percent better. So if I find something in my research that’s 50 percent better than my seventh holding I might replace that holding with this new one. This will really focus to put quality quality quality into the portfolio and the more quality I put your time into the portfolio. Some will be taken over some will explode in price. Some will be very bad as there is something that I didn’t see which is normal in the stock market and then I’ll manage the portfolio and here I want to say managing a portfolio is a process. Therefore you shouldn’t have a fixed mindset. So I would say see what’s your strategy.
Have don’t of seven stocks than stocks 150 stocks or 100 like Lynch. But then don’t have a fixed portfolio exposure. Many say OK I’m going to have maximum 14 or maximum 10 percent of my portfolio exposed to one stock. And I think this is a big mistake because that one stock might be really really good and you want to just let it grow overtime let it pay you dividends and it might be coming at some point to 10 20 40 percent of your portfolio. And if you know it’s still good why would you sell even part of it because you are selling the good in order to buy something worse. And this is something you have to see. So OK have a set number of positions in your portfolio. But be flexible with the exposure. That’s my message and I’m flexible with the exposure. I hope that some of my current portfolio holdings fall 50 percent so that I can put 20 25 percent of my portfolio in it because when I compare to value investing you risk the risk of permanent capital loss over the long term. I know that it is minimal and I can have 20 20 something percent of my portfolio in a stock because I know that. OK. The yield then business yields should be above 15 percent close to 20 with relative safety a good business and then I’m happy to go even higher. I used to have also 70 percent of my portfolio in one stock in 2009. They don’t have much time to look at stocks.