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How many stocks should you own?

The ideal portfolio size depends on your investment strategy and experience level.

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Investors building a portfolio for the first time may be wondering how many stocks they should invest in. Diversification certainly plays a role, but it ultimately comes down to the number of assets you’re comfortable monitoring.

How many stocks should I own?

There’s no one-size-fits-all approach to investing in the stock market, but most US investors tend to hold 10 to 30 stocks in their portfolio. Investors new to the market may prefer a smaller portfolio of 10 stocks, give or take — while more experienced traders may maintain a portfolio of 30 or more.

In their book, Investment Analysis and Portfolio Management, financial analysts Frank Reilly and Keith Brown suggest the sweet spot lies between 12 and 18 stocks — a range that successfully capitalizes on 90% of the benefits of diversification. Others, like Burton Malkiel, author of A Random Walk Down Wall Street, suggest that investors need closer to 20 stocks to reduce risk by up to 70%.

The more positions you maintain, the more maintenance your portfolio requires, including market research and staying up-to-date on industry news. The bottom line? You need to monitor the performance of everything you purchase. If you’re not willing to keep an eye on it, don’t buy it.

How to invest in more stocks if you don’t have a lot of money

If you’re short on funds and new to the market, there are several investment options with built-in diversification. Each of the following can be purchased through a brokerage account:

  • ETFs. Exchange-traded funds are publicly traded funds that track a specific index, sector or industry. The purchase of a single exchange-traded fund adds a healthy dose of diversification to your portfolio, as ETFs contain a variety of stocks from companies within the sector or industry they track.
  • Index funds. An index fund is a mutual fund or ETF that tracks a market index. In the US, the most popular index to track is the S&P 500, but other indices include the Russell 2000 for small-cap stocks and the Dow Jones Industrial Average for large-cap stocks. Index funds offer exposure to an entire index, many of which track hundreds of stocks.
  • Mutual funds. A mutual fund is a collective investment that allocates money across stocks, bonds and other assets. Mutual funds are professionally managed by fund managers and pool the funds of multiple investors to broaden the fund’s reach and market exposure. Like ETFs, mutual funds contain a basket of assets, offering greater diversification than the purchase of a single stock.

Why it’s risky to invest in a single stock

When you pour all your money into a single stock, the success of your investments hinges entirely on the performance of a single company. While you can earn potentially higher returns, you may also face equally sizable losses.

Think your investments are safe with blue-chip stocks, like Apple, Wal-Mart or Disney? Think again. No company, regardless of sector, industry or time in business, is risk-free. And that’s because all stocks are exposed to company risk and market risk.

Company risk, or unsystematic risk, is the risk associated with investing in a single company. And while it’s typically more of a gamble to invest in startups and small-cap stocks, there are risks to investing in larger companies, too.

Market risk, or systematic risk, applies to all companies, regardless of size, as some events — like natural disasters and political upheavals — have the potential to impact the entire market.

The best way to insulate your portfolio from potential loss is to diversify your investments, holding multiple stocks across a spectrum of industries. It’s impossible to avoid market risk, but by investing in more than one company, you reduce your portfolio’s company risk exposure.

Ways to reduce your investing risk

There are numerous ways to manage your portfolio and reduce the risk of loss.

Rely on a professional

If you need help building a portfolio from scratch, consider a financial adviser. There are numerous investment platforms that offer portfolio management services, but you’ll pay a fee to access the service — typically a percentage of your total assets.

Your adviser will sit down with you to discuss your investment goals and help you determine your risk tolerance. Once your portfolio is funded, your adviser takes care of the rest. You may meet with your adviser once or twice a year to discuss your investments, but you won’t be actively managing your portfolio. This is an option best suited for hands-off investors.

If you do want to manage your investments but would prefer some guidance before you pull the trigger, consider hiring an investment fiduciary. This person can provide occasional guidance and feedback on your portfolio while leaving the buying and selling process in your hands.

Our pick: Vanguard

Personal advisor services can help investors with more than $50,000 build a custom portfolio.

  • Low expense ratio
  • Investor-owned company
  • Wide variety of investment options

Go to site
on Vanguard's secure site

Read review
Available asset types Stocks, Mutual funds, ETFs, Forex
Stock trade fee $0
Option trade fee $1
Annual fee $20 per year

Use a robo-advisor

Robo-advisors are digital financial advisers that rely on algorithms to manage the assets in your portfolio. Some brokerages, like Fidelity Investments, offer robo-advisors alongside self-directed brokerage accounts. Others, like Acorns and Betterment, offer robo-advisor services and nothing else.

Robo-advisors operate in much the same way as portfolio management services overseen by human advisers. Your investments are selected for you at the robo-advisor’s discretion and you can monitor your portfolio by logging into the platform.

Our pick: Betterment

Choose a risk profile and let Betterment create a diversified portfolio customized for you.

  • Automatic, passive investing
  • Customized retirement planning
  • Low management fees

Go to site
on Betterment's secure site

Read review
Available asset types Stocks, Mutual funds, ETFs, Real estate
Stock trade fee $0
Option trade fee
Annual fee 0.25% on balances up to $99,999

0.4% on balances of $100,000+

Do your research

If you’re eager to wet your feet in the world of investments, open a self-directed brokerage account and build your portfolio yourself. Hand-picking your own stocks means doing your homework, so explore the research tools provided by your trading platform as well as third-party options like free stock screeners and investment newsletters.

Learn how to value a stock before adding it to your portfolio by comparing data metrics like price-to-earnings ratios and free cash flow. And make sure your money is diversified across assets, market sectors and industries to reduce the risk of loss.

Bottom line

Small portfolios are easier to manage, but too few stocks can increase your company risk exposure. Ultimately, the ideal number of stocks for your portfolio comes down to how many positions you feel comfortable maintaining.

Explore your investment options across multiple trading platforms to find the account that best meets your needs.

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