Is it smart to build my portfolio by investing in multiple stocks?
Asked 3 years ago
How do I find a balance between having enough shares in different stocks and having a too-diversified portfolio? I've pinpointed several industries that I'd like to invest in. How many stocks should you own? Is it worth buying 10 shares of a stock?
Andrew Moran
Tuesday, September 21, 2021
Although a diversified portfolio is typically recommended, legendary billionaire investor Warren Buffett had this great piece of advice: "Diversification is protection against ignorance. It makes little sense if you know what you are doing."
His supposition was that if you have done your research and you know what you're doing, then you should not need to diversify.
Now, having multiple stocks in your portfolio is necessary. But having a dozen or so stocks might not be wise unless you are investing large sums of cash, much like an index fund. It is important to weigh the priorities and opportunities for your investment in equities.
For any investor, it is important to begin your exposure with three to five stocks. This way, you can maximize your holdings and reap the rewards by possessing hundreds of shares in a handful of stocks.
So, no, it is not worth it buying ten shares of a single stock. Not only are you wasting limited capital that could go to your grander investments, you are potentially also losing out on bigger profits should that stock pay off.
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