Less is More
Charles B. Carlson, CFA
Contributing Editor, Dow Theory Forecasts
A question I'm often asked is the following:
Is it better to have 400 shares of 20 companies or 200 shares of 40 companies?
I don't think there's a right or wrong answer. It's a matter of investment style.
Personally, I would rather have 400 shares in 20 companies. Following 20 companies is easier than 40 companies. The record keeping is an easier task with 20 companies than 40 companies.
What I think is the most compelling reason for focusing on fewer companies is that, quite frankly, most investors don't have 40 good ideas. Indeed, most of us probably have closer to 20 good investment ideas. Why dilute your best ideas by including some marginal or mediocre investments?
Of course, one's portfolio needs to be properly diversified. But you can have a fairly diversified portfolio with 20 stocks, providing that all 20 aren't utility stocks or concentrated in just a few industries.
In short, I would prefer to concentrate my investments in my best ideas and not clutter my portfolio with marginal investments merely for the sake of diversification.
|
|
The BUYandHOLD website contains links to third-party websites on the Internet. BUYandHOLD provides these links to these websites only as a convenience to users of the website. Links on the BUYandHOLD website are not endorsements by BUYandHOLD or Freedom Investments, implied or express, of the linked sites or any products, services or links in such sites; and no information in such sites has been endorsed or approved by BUYandHOLD. Linked sites are not under the control of BUYandHOLD or Freedom Investments, and we are not responsible for the contents of any linked site or any link contained in a linked site. No information contained in the BUYandHOLD website or accessed through any linked site, or any link contained in a linked site, constitutes a recommendation by BUYandHOLD or Freedom Investments to buy, sell or hold any security, financial product or instrument. Information accessed through linked sites is not, nor should be construed as, an offer or a solicitation of an offer, to buy or sell securities by BUYandHOLD or Freedom Investments. BUYandHOLD does not offer or provide any investment advice or opinion regarding the nature, potential, value, suitability or profitability of any particular security, portfolio of securities, transaction or investment strategy, and any investment decisions you make will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.
Copyright
© 1999 – 2012 Freedom Investments. All Rights Reserved.
Freedom Investments, Inc. Member FINRA/SIPC
Privacy & Security
|
