A previous article on Wealth-Building vs Wealth-Protection gives a suggestion on how many stocks you should hold, depending on your strategy.
This article summarizes Wealth-Building vs Wealth-Protection and then shares comments from well-known investors.
1) Wealth-Building
If you are still working and your timeline to achieve financial independence or retirement is 5 years away or more, then you are in “Wealth-Building Mode”. In this case, you should try to create a focused portfolio of stocks. Tykr’s job is to help you find safe value stocks that can build your wealth and avoid weak speculative stocks that can lose your money. The goal is to beat the returns of the S&P 500 (about 10% per year), which is very easy to do with Tykr. In other words, Tykr is here to help you build your wealth in less time.
Number of stocks to hold in wealth-building mode: 10 – 15
What annual returns should you aim for: 15% – 50% per year (Returns are not guaranteed)
2) Wealth-Protection
If you are at or near financial independence or retirement, then you are in “Wealth-Protection Mode.” In this case, you should try to invest in more stocks, invest in dividend stocks, or consider investing in ETFs or Index Funds. The goal is to match the returns of the S&P 500 (about 10% per year). In other words, Tykr is here to help you protect your wealth.
Number of stocks to hold in Wealth-Protection mode: 15 – 30
Number of ETFs or Index Funds to hold in Wealth-Protection mode: 3 – 5
What annual returns should you aim for: About 10% per year (Returns are not guaranteed)
Here are tips from well-known investors:
- Benjamin Graham has stated, “You should own a minimum of 10 stocks and a maximum of 30 stocks.”
- Warren Buffett has stated that “Diversification makes very little sense for anyone who knows what they are doing. Diversification is a protection against ignorance. Investing in the entire market is fine if you don’t know how to analyze businesses. It’s crazy to own 30, 40, or even 50 stocks.”
- Charlie Munger has stated that “Diversification can make sense for individuals who are just trying to hit the market average.”
CLICK HERE to view a video of Warren Buffett and Charlie Munger making comments on diversification.
In summary, depending on whether you are in Wealth-Building Mode or Wealth-Protection Mode, it should help guide you to how many stocks you should hold.