You only need 15 equities in your portfolio

pqrdef

grey_gym_sock wrote: »

compared to buying only 1 stock

Compared to investing the same total amount of money, but all in 1 stock. But that's not the alternative. I don't want to put all that money into one stock. I'll only put in as much as I'm happy to risk. Doesn't mean I have to buy something different with the rest of my money. That doesn't reduce my risk.

Some investment strategies seem to be like the man who decides how much money he's going to stake on which races before he picks the horses. He's a loser, he's just paying the bookies for entertainment. Better to only bet when you think you see a good bet.

Suppose I buy a stock because I fancy it. Bearing in mind that anything can happen, I only put in as much as I'm comfortable with. Later I see another stock I fancy, so I buy that as well. If it's in the same sector, so what? If there's a sector where I don't see anything I think is a good bet, I won't bother. I don't need to be in it just for the sake of being in it.

atush

Thrugelmir wrote: »

There's no point in holding both Shell and BP. As the stocks are too closely correlated, most likely will both move in the same direction when crude prices change. Ideally the 15 need to be in totally unrelated sectors.

I do agree with this in general, but I am a long time holder of Shell, and still happy with it. But I bought BP on Weakness after the gulf oil spill. So that is why I hold both.

grey_gym_sock

pqrdef wrote: »

Compared to investing the same total amount of money, but all in 1 stock. But that's not the alternative. I don't want to put all that money into one stock. I'll only put in as much as I'm happy to risk. Doesn't mean I have to buy something different with the rest of my money. That doesn't reduce my risk.

well, it doesn't usually make sense to invest all your money. the way i look at it is that i'd first decide how much i'm prepared to invest, and then decide how to divide it up among different investments.

this seems like a useful way of looking at it, because the idea is to have enough cash to hand if the boiler breaks down. or there may be money i plan to spend on something next year. and so on. so that there are various factors which limit the total 1 can sensibly invest.

Some investment strategies seem to be like the man who decides how much money he's going to stake on which races before he picks the horses. He's a loser, he's just paying the bookies for entertainment. Better to only bet when you think you see a good bet.

investing is a bit like gambling, yes. but not exactly like it. if you do it right, you try to minimize the risks. you only take on risks because there's a good chance of being rewarded for taking them on.

Suppose I buy a stock because I fancy it. Bearing in mind that anything can happen, I only put in as much as I'm comfortable with. Later I see another stock I fancy, so I buy that as well. If it's in the same sector, so what? If there's a sector where I don't see anything I think is a good bet, I won't bother. I don't need to be in it just for the sake of being in it.

this depends very much on the significance (to you) of the sums you're going to invest.

if what you're putting into 1 stock is insignificant to you, you can treat it as gambling if you like. if it's your entire life's savings, intended to support you in your retirement, then you'd be made to put it in 1 stock because you 'just fancy it'.

it's when the total sum is significant to you that it's silly to put too much in 1 share, or 1 even sector. it does matter if they're all small oil explorers, because there are things that could happen that would hurt all of them. which matters if it's your pension fund. though not if it just seemed like more fun than the 2.30 at chepstow.