badcompany
12-15-2013, 12:00 AM
For me, it's around 12.
I've found this number is a good compromise between being aggressive while, at the same time, protecting yourself from individual stock risk.
With 12 stocks, equally weighted, each will be about 8% of the portfolio. Let's say you wake up one morning and find that the Feds raided the headquarters of one of your companies, and as a result the stock is down 25%.
That 25% works out to 2% of your bankroll. Certainly a bad day, but, not something that will take years to overcome.
Of course, this is just a guideline. It doesn't have to be exactly 12, and the stocks don't have to be equally weighted.
Btw, that Fed raid just happened to Lumber Liquidators.
I've found this number is a good compromise between being aggressive while, at the same time, protecting yourself from individual stock risk.
With 12 stocks, equally weighted, each will be about 8% of the portfolio. Let's say you wake up one morning and find that the Feds raided the headquarters of one of your companies, and as a result the stock is down 25%.
That 25% works out to 2% of your bankroll. Certainly a bad day, but, not something that will take years to overcome.
Of course, this is just a guideline. It doesn't have to be exactly 12, and the stocks don't have to be equally weighted.
Btw, that Fed raid just happened to Lumber Liquidators.