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QuestionsCategory: Portfolio ManagementPortfolio Weighting
Sun Down asked 2 months ago

Hi,
Q1) If I have $100,000, how many stocks do you think I should own? 
Q2) Say I decided to go with 20 stocks, I should allocate 5% for each stock.
And I should do it in 3 tranches:
3% (initial)
1% (price drop another 10%-20%)
1% (price continues to drop another 10%-20%)
But what if after I allocate 3% of the capital to this stock, and the price goes up or never drop down below the price I bought?
This stock will now be 3% in my portfolio, while the rest on 5%. It will become imbalance now? 
If one stock maybe still negligible, but what if 10 stocks all like that? I will then have 10 stocks on 30%, and the remaining 10 stocks on 50%, and it will be 80% now, imbalance? 
Kindly advice how to go about if face with this kind of scenario. Thanks.

1 Answers
Victor Chng answered 2 months ago

Hi Sun Down,
 

  1. It really depend on how comfortable are you in holding the number of stocks because you can expect more volatility when the stock number is low. If my portfolio is $100,000, I will usually hold between 10-15 stocks. 

  2. At any point of time, you will not get exact same percentage for all stocks, 1-2% difference is still ok. The important things is not to have huge difference. 

  3. Based on your this scenario:  “If one stock maybe still negligible, but what if 10 stocks all like that? I will then have 10 stocks on 30%, and the remaining 10 stocks on 50%, and it will be 80% now, imbalance?” – There will not be any imbalance unless you have 5 stocks at 10% while 10 stocks at 3% (This scenario will cause imbalance if you invest in the wrong stocks) .

 
Hope this helps :)