Why I hold 3 stocks only?
Some people with a 30k portfolio might put 3k each into 10 positions for diversification purpose
For me, my portfolio is a mid 6 figure and i often put 100k-200k into a single position, I believe in focus investing
I can only come out with 2-3 great ideas a year and I often put a significant net worth into each of them, if you yourself are convinced that its a great super amazing idea then why put peanut sums?
I could put my money into 10 different stocks and if I had to estimate their future returns and rank them, then my portfolio may look like this
Counter A - Returns 20%
Counter B - Returns 15%
Counter C - Returns 15%
Counter D - Returns 12%
Counter E - Returns 12%
Counter F - Returns 12%
Counter G - Returns 10%
Counter H - Returns 10%
Counter I - Returns 8%
Counter J - Returns 8%
I would ask myself, why the hell am I putting my money into Counter I and Counter J? why diversify into lesser ideas just for the sake of playing it safe? A lot of new and even seasoned investors fall into this trap
if you want to really diversify, just purchase the S&P 500 ETF and the STI 30 ETF and get your long term market returns of 8% to 10%, its just really simple
if you choose to be a stock picker and would want to eventually make a career or living out of it, you have to outperform the index by a wide margin... and to do so you place your bets on your best ideas!
so I would rather put my money evenly into Counter A, B and C! like how i put my money in hrnet, propnex, F&N!
In the past I had a wider portfolio holding 3 banks 5 reits and some other blue chips, it felt so safe.. but the returns were not much better than the STI ETF...
So I when back to my roots, back to focused value investing and aim towards 12% to 15% long term returns
Back when I started, I remembered my portfolio having a value of 25k only.. I bought 2 stocks
Challenger 150,000 shares at 10 cents for 15k
Starhub 5,000 shares at 2 dollars for 10k
One became a 5 bagger another 2 bagger... these were not even my best ideas! but it worked very well because I focused fire and the portfolio returns were amazing!
So now its back to basic!
Put all eggs in a few baskets and watch them closely ^_^