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Author: ARGENTBULL Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 6729  
Subject: when to say when Date: 12/8/2001 5:55 PM
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I'm building up my portfolio and have done modest research on several companies. I'd like everyone's opinion of how many holdings are too many?I have a core investment of indexes and brk.b which make up about 70% of my portfolio and i'm not changing that. My question is how many stocks should make up the other 30%. 6 stocks with 5% each was my initial idea. Opinions please!

-Brantley
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Author: TheVlad Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4157 of 6729
Subject: Re: when to say when Date: 12/8/2001 6:51 PM
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I'm building up my portfolio and have done modest research on several companies. I'd like everyone's opinion of how many holdings are too many?

Studies have shown that beyond having 20 stocks in various sectors of economy further diversification will not yield significant improvements in reducing market risk.

10-12 is pretty sufficient. However, many point out that you should not be diversifying for the diversification's sake and that concentration is actually better. Besides, it could get tedious to keep track of 20 stocks.

Another thing to keep in mind is how much do you have to invest. If you have a very limited amount of capital like $10,000 you may want to follow 2-3 stocks. If you have $25,000, then maybe 5 stocks, and if you have $100,000 then maybe 10.

Vlad

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Author: FrugalSpeculator Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4158 of 6729
Subject: Re: when to say when Date: 12/8/2001 11:06 PM
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Rather than trying to come up with a magic number of stocks to own, why not try to decide on the max percentage for a single stock and consider the following:

Some day you will probably find a great stock trading at a great price, which all your research and due diligence will confirm is a great stock. However, after buying it, you will relize _______ and witness the whole thing go belly up and most every dollar you put into it will be gone.

In other words, how much of your port do you care to lose on a single stock?

FS

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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4159 of 6729
Subject: Re: when to say when Date: 12/9/2001 12:50 PM
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Author: FrugalSpeculator Date: 12/8/01 11:06 PM Number: 4158
Some day you will probably find a great stock trading at a great price, which all your research and due diligence will confirm is a great stock. However, after buying it, you will relize _______ and witness the whole thing go belly up and most every dollar you put into it will be gone.

In other words, how much of your port do you care to lose on a single stock?


I always purchase large established companies and totally avoid this problem - like Xerox, Polaroid, and Enron :)

RK

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Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4160 of 6729
Subject: Re: when to say when Date: 12/11/2001 1:07 PM
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In other words, how much of your port do you care to lose on a single stock?

I always purchase large established companies and totally avoid this problem - like Xerox, Polaroid, and Enron :)

Well said, RK!!

As for the main topic, I believe in limiting your exposure to any one stock for reasons stated. A maximum of 3 to 5% (of total equity investments) exposure to any single stock is a practical limit.

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Author: Dave27183 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4161 of 6729
Subject: Re: when to say when Date: 12/11/2001 5:02 PM
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<<<<<<<As for the main topic, I believe in limiting your exposure to any one stock for reasons stated. A maximum of 3 to 5% (of total equity investments) exposure to any single stock is a practical limit.>>>>>>>>

This generally a good idea, but if you get aboard a great winner, strict adherence to this rule will force you to sell way too soon. I've had a 7 to 10% limit, but violated it twice in my investment lifetime with two great winners.

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Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4165 of 6729
Subject: Re: when to say when Date: 12/13/2001 7:19 PM
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This generally a good idea, but if you get aboard a great winner, strict adherence to this rule will force you to sell way too soon. I've had a 7 to 10% limit, but violated it twice in my investment lifetime with two great winners.

I don't have an argument when the imbalance or over limit is caused by a winning stock performance. This also gives you the opportunity if desired to sell part of your position so that with the balance you are playing with house money to use a gambling expression.
My suggested maximums (or yours) are more appropriately applied to initials investments.

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