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Diversification

Questions › Category: Investor Psychology › Diversification
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Jeremy Foo asked 9 months ago

I am aware of the “Rule of 100” for allocation between growth and income stocks, and the rule of thumb of between 10 and 30 stocks for optimal diversification. So should the number of growth stocks in my portfolio be between 10-30 and at the same time the number of income stocks also separately be between 10-30, and yet fulfill the “rule of 100” allocation?
e.g. if I am 60 years old, then 20 income stocks and 10 growth stocks. This makes a total of 30 stocks for optimal diversification and meets “rule of 100” for allocation.
 

2 Answers
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Victor Chng answered 9 months ago

Hi Jeremy, 
 
The rule of 100 is in percentage. Using your 60 years old as an example, it means that 60% should be income stocks while the remaining 40% are growth stocks. Hence, if you are planning to own 30 companies, then the ratio should be 18 income stocks and 12 growth stocks

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Jeremy Foo answered 9 months ago

But of course! Got it. Bad math on my part. Thanks, Victor.

Victor Chng replied 9 months ago

Welcome Jeremy :)