How Many Stocks Should You Own?

Dividend Earner

Dividend Earner

Updated on

3 min read Affiliate Disclosure

Early on in your investing journey, the number of stocks you hold is not a concern but as your portfolio grows, you start thinking about how many different stocks you should have.

There is a tendency to set a fixed amount per holding and then add more holdings as a way to limit your exposure to a company. However, you need to be able to adjust those values as you grow your portfolio.

A factor that is pertinent to deciding how many stocks is how much per stock you want to have. You can’t just put a really small amount with your discount broker since the trading fees are going to eat up your cash.

Discount brokers are now offering low trading fees compared with just 5 years ago. There are no reasons to pay more than $10 per trade nowadays.

There are different ways to look at how much you should have in a single company.

  • You want to DRIP the stock so you put enough for the dividends to cover the purchase of new shares.
  • You want equal exposure for simplicity and balancing
  • You want to limit risks on some of your selection such as having a full or partial position

As part of your investing journey, outline your strategy for the number of ETFs and stock holdings. Feel free to adjust it but be intentional about it.

How Many Stocks For Your Portfolio?

The size of your portfolio does matter. If you have $100,000 in your portfolio, chances are you are increasing the size of your holdings compared with someone starting with a $10,000 portfolio.

The same applies to someone who has $1,000,000. Back in 2009 when I bought the Canadian banks at less than half their value, I still only bought $10,000 while my parents bought for over $50,000. At some point, the size of the money you talk about becomes relative.

Related: How to invest with little money

Rule of Thumb on Number of Stocks

If you can’t follow all the companies you invest in, how do you know they are still good investments?

I invest for the long-term and I work on selecting companies that have a moat in their market with the ability to sustain it.

I also need to understand the business of the company and be able to explain it to my kids. If I can’t, it’s too complicated for me.

It’s not a science, and your fear of losing money will influence your decision here. As your portfolio grows, do you add more? or keep adding to the current holdings?

Another factor hindering DIY investors is adding to an existing position can often be at a higher price and it’s a mental blocker for some when it should not. The case of whether or not a stock is expensive or not becomes another thinking point.

My Magic Number

I have under 30 individual stocks. See my portfolio for the details.

However, all the Canadian banks are somewhat the same to me. Rather than invest in just one, I went wide with the best one to avoid too much exposure to just one bank.