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Determining the Number of Stocks to be Included in Your Portfolio

No exact number can be given to the number of stocks investor should possess. Their number is determined mainly by the situation in which the investor is in.

Many financial experts advise the holding of approximately 15 to 20 individual stocks. However, these should be spread among different industries in order to achieve a greater degree of diversification.

However, for an investor who is making his/her first steps in investing these numbers can be unachievable from the start. If you are such an investor, regard these numbers as a final goal.

However, many successful investors such as Warren Buffet have achieved great profits without spreading their money over so many stocks. All you should remember is that you should diversify your portfolio to the greatest extent possible.

When you establish the structure of your investment portfolio you should evaluate your financial goals, time horizon for their achievement and how risk tolerable you are. The evaluation of these factors will determine your mix of stocks and whether it is more conservative or aggressive.

Conservative Investors

Conservative investors should focus on stocks from industries that experience slow and gradual growth during the different cycles of the economy. We recommend the investment in consumer staples stocks and utility stocks.

Conservative investors tend to concentrate on the purchase of stocks issued by large and well-established companies. They also tend to put a higher portion of their money in bonds and cash.

Aggressive Investors

If you prefer a more aggressive type of investing then foreign stocks, technology stocks and high growth stocks may be the type of investment that is right for you.

Aggressive investors typically target smaller and emerging companies that show potential for substantial growth. However, such investments bring higher levels of risk.

Aggressive investors tend to put a higher portion of their money in stocks, overlooking bonds and cash.

When you establish your portfolio you should not forget to include other investment types besides stocks. In order to construct a better risk profile you should include other asset classes such as cash and bonds.

Finally, all you should remember is to construct your portfolio in such a way that it best suits your needs and financial goals. Additionally, it should be so set that it doesn't neglect the level of risk you are willing and able to take. Diversify among different asset classes and industries in order to increase your chance for successful investing.

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