How many stocks should you have in your portfolio? (2024)

FAQs

How many stocks should you have in your portfolio? ›

Most studies use the fully diversified portfolio as a benchmark and then derive that a portfolio of 20-30 stocks achieves a 'similar' risk profile as the target portfolio.

“Most research suggests the right number of stocks to hold in a diversified portfolio is 25 to 30 companies,” adds Jonathan Thomas, private wealth advisor at LVW Advisors.

Stock allocations by age

Investors in their 20s, 30s and 40s all maintain about a 41% allocation of U.S. stocks and 9% allocation of international stocks in their financial portfolios. Investors in their 50s and 60s keep between 35% and 39% of their portfolio assets in U.S. stocks and about 8% in international stocks.

Private investors with limited time may not want to have this many, but 25-35 stocks is a popular level for many successful investors (for example, Terry Smith) who run what are generally regarded as relatively high concentration portfolios. This bent towards a 30-odd stock portfolio has many proponents.

Determining the 'optimal' number of stocks to hold is a crucial consideration when diversifying your stock portfolio. While there isn't a one-size-fits-all answer, experts generally suggest that holding around 20-30 individual stocks can balance effective risk diversification and manageability.

The research by three U.S. finance professors led by University of Arizona professor Scott Cederberg comes to the surprising conclusion that a portfolio holding 100% stocks and no bonds is best, even for people already in retirement.

The more equities you hold in your portfolio, the lower your unsystematic risk exposure. A portfolio of 10 or more stocks, particularly those across various sectors or industries, is much less risky than a portfolio of only two stocks.

Many financial advisors recommend a 60/40 asset allocation between stocks and fixed income to take advantage of growth while keeping up your defenses.

“It is generally recommended to have a portfolio size of at least $100,000 before considering investing in individual securities, and at least $500,000 before moving away from investment products and investing directly in stocks and bonds.”

A diversified portfolio should have a broad mix of investments. For years, many financial advisors recommended building a 60/40 portfolio, allocating 60% of capital to stocks and 40% to fixed-income investments such as bonds. Meanwhile, others have argued for more stock exposure, especially for younger investors.

Is 20 stocks too much? ›

It's a lot easier to track 15 to 20 high-quality stocks than a large basket of 50 to 100 stocks. It's true that you shouldn't put all your eggs in one basket. But that doesn't mean you should own all the eggs out there. Diversification is good, but too much of it can be bad.

To make $1,000 per month on T-bills, you would need to invest $240,000 at a 5% rate. This is a solid return — and probably one of the safest investments available today. But do you have $240,000 sitting around? That's the hard part.

One rule of thumb is to own between 20 to 30 stocks, but this number can change depending on how diverse you want your portfolio to be, and how much time you have to manage your investments. It may be easier to manage fewer stocks, but having more stocks can diversify and potentially protect your portfolio from risk.

Most studies use the fully diversified portfolio as a benchmark and then derive that a portfolio of 20-30 stocks achieves a 'similar' risk profile as the target portfolio.

Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.

It's a good idea to own a few dozen stocks to maintain a diversified portfolio. If you load up on too many stocks, you might struggle to keep tabs on all of them. Buying ETFs can be a good way to diversify without adding too much work for yourself.

The 60/40 portfolio dictates a simple split of your assets— 60% for stocks and 40% for bonds. This asset allocation is simple to apply and understand, which may appeal to investors who prefer more of a hands-off approach.