An unlucky selection of 20-30 stocks can massively underperform other luckier choices over 25 years. To mitigate that risk, a long-term investor should be more aggressive in diversifying the portfolio and hold more stocks than the number suggested by a static one-period risk model.
Understanding the Ideal Number of Stocks to Own
The more equities you hold in your portfolio, the lower your unsystematic risk exposure. A portfolio of 10 or more stocks, particularly across various sectors or industries, is much less risky than a portfolio of only two stocks.
The “Rule of 30,” popularized by Tee Up Advisors, is a powerful financial benchmark designed to help maturing businesses balance growth and profitability. This rule, an adaptation of the tech industry's Rule of 40, suggests that the sum of a company's growth rate and profit margin should equal or exceed 30%.
It's okay to have 30 stocks on that list. Look up Wall Street's earnings per share (EPS) estimates for those companies. Cross companies off your list that are not experiencing EPS growth. Pick four or five of the remaining companies that represent various industries and sectors to keep in your $10,000 stock portfolio.
If the average dividend yield of your portfolio is 4%, you'd need a substantial investment to generate $3,000 per month. To be precise, you'd need an investment of $900,000.
All told, Buffett and his team oversee around 50 stocks in Berkshire's equity portfolio, which is valued at more than $300 billion.
Page 2. 1. The Buffett Rule: A Basic Principle of Tax Fairness. The Buffett Rule is the basic principle that no household making over $1 million annually should pay a smaller share of their income in taxes than middle-class families pay.
The S&P 500 is a stock market index maintained by S&P Dow Jones Indices. It comprises 503 common stocks which are issued by 500 large-cap companies traded on the American stock exchanges (including the 30 companies that compose the Dow Jones Industrial Average).
Rule No.
1 is never lose money.
One rule of thumb is to own between 20 to 30 stocks, but this number can change depending on how diverse you want your portfolio to be, and how much time you have to manage your investments. It may be easier to manage fewer stocks, but having more stocks can diversify and potentially protect your portfolio from risk.
Investors might sell their stocks to adjust their portfolios or free up money. Investors might also sell a stock when it hits a price target or the company's fundamentals have deteriorated. Still, investors might sell a stock for tax purposes or because they need the money in retirement for income.
A widely accepted rule of thumb claims that a properly diversified portfolio must have no more than 10 to 20 percent of total investment assets in a particular stock.
At a min- imum, we recommend owning at least 15 stocks to avoid over-concentration in any single stock or sector.
Here's how that breaks down by each decade along the way: Savings by age 30: the equivalent of your annual salary saved; if you earn $55,000 per year, by your 30th birthday you should have $55,000 saved. Savings by age 40: three times your income. Savings by age 50: six times your income.
The Bottom Line. With many available options, investors can use $1,000 to purchase ETFs, stocks, or bonds. Simply paying off outstanding debt may save money in interest payments over time and prove to be a wise investment.
Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. Those of you that have flipped on CNBC either on purpose or by accident sometime in the past two years may know those companies as the so-called Magnificent Seven, or “Mag 7” in Wall Street-speak.
Historically, the United States Stock Market Index reached an all time high of 6099.97 in December of 2024. United States Stock Market Index - data, forecasts, historical chart - was last updated on January 14 of 2025.
Looking at the S&P 500 from 2013 to mid-2023, the average S&P 500 return for the last 10 years is 12.39% (9.48% when adjusted for inflation), which is also higher than the annual average return of 10%.
What Is a 70/30 Portfolio? A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds. Any portfolio can be broken down into different percentages this way, such as 80/20 or 60/40.
The 3 Ps of investing: purpose, plan, and patience.
“We test the wisdom of retaining earnings by assessing whether retention, over time, delivers shareholders at least $1 of market value for each $1 retained.” This will assess whether management's capital allocation decisions are creating value for shareholders.
Despite being the sixth-richest person globally, Warren Buffett continues to drive a 2014 Cadillac XTS he purchased with hail damage. Although he can afford any luxury vehicle, Buffett prefers the practicality of his 10-year-old car.