How many companies should one invest in at a time? Is there a limit?

Answer 1

There has been a surprising amount of work done on that very question. The subject is Modern Portfolio Theory. The theory states that by diversifying your holdings you will increase your return and decrease your risk--specific risk that is. With enough diversity you are subject to only systemic risk--the risk that the market is going to drop as a whole. The theory has even come up with a number of holding beyond which there is no substantial reduction in specific risk. That number is about 20. However, beyond 10 the marginal reduction deminishes greatly. So to answer your question specifically at least 10 and as many as 20.

Now it is not just the number of companies that you should hold but also the make up of the corrolations of returns among the companies that is very important. For example if you should buy stock in 10 companies in the internet field, you are not well diversified because they all tend to move together. Their returns have a very high degree of corrolation as investors discovered to their sorrow in 2000 when they all dropped like rocks.

So the 10 to 20 companies should consist of a few large caps, a few small caps, a few foreign companies, a few value stocks, and a few growth stocks, preferrably in different industries.

This is where mutual funds and index funds come in very handy. With a small investment one can obtain good diversity if one chooses the correct mutual funds.

And do not forget fixed income investments either. They have a very low corrolation with equity investments so they add diversity and reduce risk and increase return.

Answer 2

There is no limit. However, the following should be kept in mind:
1) 15 companies in your portfolio is ideal as monitoring the same on a regular basis is manageable
2) Ensure that the 15 companies are diversified across various sectors
3) Invest a minimum of at least Rs 25,000 in each of the companies over a period of time. DO NOT invest Rs 25,000 at ONE GO in any company
4) Use Averaging cost technique when the market goes down if you have conviction in the companies in your portfolio
5) Lastly monitor your portfolio regularly ( at least on a weekly basis if not more frequently)
6) Play Long term only

Answer 3

Investing is not a problem , You can invest in as many company as you wish, but the main thing is monitoring your stocks, The buying and selling is a regular feature to book profit. If you are a daily trader concentrate on 5-7 stocks only.
If you are a long term investor you can go up to 20 .
Still the no. is not limitation it is your ability to monitor the stocks.
You can use portfolio tracker of various web-sites to track your investments.
Thanks

Answer 4

I've heard that if you are going to invest in individual companies to have a portfolio of about $40,000 to $50,000 to START. That money should be in no less than 8-10 companies across various sectors.

And be sure to keep adding diverse companies. In other words, sector or index fund by definition and your risk drops considerably.

Answer 5

My answer for your first and second questions is it depends and no, there is no limit respectively. Concentrating on a few stocks could make you huge profits when you get it right but the reverse also holds true while diversifying too much will likely dilute the impact of your investment.

Answer 6

There could be no exact limit as such but ideally for a individual investor, i recommend that the no. should not be too high. it could be around 12-15.
then again, it depends on the money that u have to invest.
Again, i recommend one to maintain proper diversification of assets as the uncontrollable risk always persists with all kind kind of investments.
proper knowledge and patience is the key to riches.

wish u successful investing.

Answer 7

this depends on your goal--whether you are doing it for short term gains or for investment purposes and also the money allocation.there is no limit-the limit is only dependent on allocation.whatever the number is you must keep half the amount to average the cost [[ in a fundamentally sound company of course]]

Answer 8

There is no limit as such. But try to diversify your investments by investing in different type of things like MF, IPO, gold, Infrastructure, PPF etc etc.(assorted portfolio)

Answer 9

There is no limit but go into a mutual fund for more safety. let the pros manage your money, go to Vanguard they are good they will go over all their funds with you and help you decide what might be the best fund for you. If you pick an index fund you will do as well as the market does. But if you go into a managed fund you might or might not beat the market.

Answer 10

No such limits. It is advisable to limit the numbers to the number one can manage. Otherewise invest in mutual funds.