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:
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.
Hi Sun Down,
- 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.
- 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.
- 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 :)
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