How Many Stocks is Enough?
For most investors, they have their full time job other than
watching the stock price movement daily. Stock is investments
not jobs. However, that does not mean you should ignore your
stock after you have bought it. You have already put your egg in
a basket and your job now is to watch it.
Periodic monitoring is needed for any investments. Ideally, you
need to get updates of your holdings every three months. This is
the period when they report quarterly earnings. This poses
another question. If we hold a day job during the weekdays and
only have a few hours to spare on the weekend, how many stocks
should we ideally hold?
There are people that can research stocks fairly quickly. There
are those that can't. The general guidelines however, it will
take one weekend to get updated with one of your current
holding. Assuming you do one stock each weekend and you have
your 'free' time during two other weekends, therefore, you can
hold a maximum of eleven stocks. This is because you have to
evaluate your holdings every thirteen weeks.
What about diversification? Should we buy more stocks to
diversify our risk? Yes, we need to diversify. But what is the
use of buying investments that you didn't research ? If you have
no time to research then don't buy it. It is not worth your
time. As stated previously, every investors have different speed
of evaluating their stock investment. The more experienced
investors are generally faster than novice investors. If you can
evaluate two stock holdings every weekend, then you can afford
to buy 22 different stocks without having to neglect them. This
guideline applies to any other form of investment. Put your egg
in your basket and then watch them.