While there is no specific limit on what percentage of your portfolio should be in stocks, invest in it only if you can invest your time to be on top of your stocks, advises Dhirendra Kumar
30-Jul-2020
Over the years, I have bought several stocks based on the recommendations of Wealth Insight. Now, Value Research Stock Advisor also has many good stock recommendations. I am in the dilemma of buying more stocks, as the number of stocks in my portfolio has gone very high. What should be the optimum number of stocks or the percentage allocation of stocks for a retail investor?
- Ashish Jain
Yes, we have been coming up with a list of companies with a moat on Wealth Insight for the past six years. The list comes in very handy for several stock investors and last month, we also reviewed companies that we had recommended five-six years ago to check how they have performed, whether they have been able to withstand the test of time and if they still have the moat. We also analysed the companies that had not been able to protect the moat and new companies that had been added to the list over the years. So, last month, Wealth Insight revised the list of companies having moat with a mention of all the exclusions and the new additions.
Coming to what per cent of your portfolio should be invested in stocks, I think you can have 100 per cent of your portfolio in stocks if you are interested in it and have the time and inclination to do research on companies and businesses that you intend to invest in. Ideally, it depends on when you need the money. If you need the money within the foreseeable future or within short or medium term, then the corpus should not be invested in stocks.
You should have about 10-20 stocks in your portfolio. Anything less than 10 stocks would lead to less diversification of the portfolio, while above 20 may not be easy to track. Your portfolio should have only the number of stocks that you can track closely. Keeping track of your stocks is a time-consuming process. Also, make sure that you have significant positions in these stocks. There is no benefit of having a large number of stocks where each stock may make about just 0.1-0.5 per cent of your portfolio. Each stock should at least make 3-4 per cent of your portfolio. Then only, you would be really interested in the performance of these companies and if the company does exceptionally well, you may benefit substantially from the same. On the other hand, if the company is not doing good, you will feel the need to take some corrective steps.
Value Research Stock Advisor can help you keep track of your stocks. The service helps its users stay on top of its stocks by providing you with regular updates on your stocks. All users are notified of any significant development in the stocks, like a 10 per cent movement in the stock price, quarterly earnings update, etc. that may help investors form an opinion about investing in a particular company. It also provides its users with the 'sell and buy' recommendations for stocks.
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