It
is a most disputed topic with respect to portfolio construction, to
understand the ideal number of stocks in a portfolio. while some
recommend a massive collection of variety of shares in portfolio with
over 50 stocks, some swear by a high conviction, concentrated portfolio
of not more than 8-10 stocks.
Now the question arises, which one is the right approach?
At this stage in my opinion, there is no right or wrong answer to this. Here is a principle though...
- Those who understand business well, then they should aim at building a concentrated portfolio.
- Those who can't understand business well and they do not have the time and resources to analyze, then look at the diversified portfolio, wherein they would protect them selves by fencing of your risk across multiple stocks. However, do ensure they do not have more than 15-20 stocks in the portfolio.
I personally keep about 10-15 stocks in my current portfolio an I am working towards shrinking it to 10 stocks.
Here is a Warren Buffet's video reference to understand the portfolio diversification.
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Investment