Should I take profits, my stock is up again!? Many investors find this the hardest question. Let the winners run. Sell losers, buy winners.
Investor watch lists and toe holds can accomplish much. Watch lists or model portfolios enable risk free monitoring but for best performance I use toe holds. Putting skin in the game serves to focus my attention.
Portfolio portion measurements or the percentage dedicated to each investment and the effect that inevitable changes have on those portions needs attention.
Costs drive investor position sizes. Minimum positions for affordable costs keep costs per share low. Investors know minimum position sizes for affordable costs. This second sizing factor gets the transaction costs right. This effectively puts a financial barrier or threshold in place for owning an individual share position.
Investing academics and holding counts in multiple studies conclude 16 stocks are the ideal number, with 5% to 7% of a portfolio held in each position. The range is surprisingly narrow. Most suggest between 15 and 20 stocks as the best number. You and your top research assistant, Google, can find endless numbers of studies.
Considering how many stocks to hold ranges between 5 to 30 stocks with an exception. There are 5 Factors to consider: Number of holdings, Size of positions, Diversification, Risk and Psychology. This post is part 1 of the 6 part White Top View series, Introductory Portfolio Management – Counts and Sizes.