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Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75649  
Subject: Re: How many stocks per investment? Date: 12/21/1999 11:39 AM
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You are likely to get alot of response & alot of diversity in those responses. Further, the answer to this question is pure personal opinion, to which I will give you just one response.

Being mathematically & statistically trained, I firmly believe:

1. No matter how hard I try, I seem unable to "cut the shaff from the wheat" as it relates to picking substantially winning stocks. I pick very few losers, however, were I to pick 100 stocks; 20 - 25 will be up subtantially; 70 will go no where; and 5 will be dead dogs.

2. #1 restated; Pareto's law (to which I seem to comply) says that 80% of my annual gains will come from 20% of my stock picks.

3. Basic statistics tells us that when conducting a sample of a population we need at least 30 degrees of freedom to be 95% or more confident in the results of the sample. Isn't picking N number of stocks from all those thousands available not unlike "sampling"? As a result, I always hold a minimum of 30 different stocks & many times as much as fifty.

This philosophy seems to work, at least for me. Further, others have opined that this process should do nothing more than mimick the S&P500. However, actual results so far have proven otherwise. For the last three years I have been able to double the S&P500 with this strategy; however, I do not beleive I can continue this track record indefinitely into the future.

FWIW

TheBadger
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