A common question once you start buying into stocks is, “How many stocks should I buy in my portfolio?” A lot goes into this answer…
“The more stocks you hold, the more your portfolio tracks the entire market. With a small account the goal should be to outperform the entire market.”– The Common Trader
Many people will tell you different things, myself included. Believe it or not my partners disagree with me a bit on what I think. I’m here to share WHAT I BELIEVE the best apporach is depending on account size.
My opinion, not advice.
Portfolio Under $10,000
You may hate to hear this but this amount of money won’t make you rich with stocks. Don’t act conservatively with this amount, BE HIGH-RISK.
The reason I say this is because say you have all $10K invested. The market dips a massive 20%, which is extremely unlikely by the way. you only lost about $2,000 depending on what you bought into. $2k is meaningless when you think 20 years out. You will do yourself a disfavor by not taking the risk now.
“You can invest with less risk and make more money in the stock market. All you have to do is not be an average investor.– Robert Kiyosaki
5 stocks max is your best bet.
- No total market ETF’s (Don’t own $SPY!!)
- 1 Dividend, blue-chip, Stable Stock. (Not 1 of each…)
- 2-4 High-growth stocks.
- No Bonds
- No REIT’s
1.) The reason I say no total market ETF’s is because they produce lower & more stable returns. These kinds of returns won’t propel the account by much. 8% a year on $10k is only $800… Your yearly contributions will be more than the returns. Take some risk.
2.) The high-growth companies will give very good returns if and only if they are solid business’s. If they don’t, you took a great risk and only missed out on an $800 opportunity cost if you invested into ETF’s as an alternative.
- Some of my favorite high-growth companies that are currently in production/conducting service are Zillow $Z, Peloton, $PTON, AMD $AMD, and Nvidia $NVDA. These comapnies are growing at high rates while bringing in revenue. Meme stocks posted on Reddit that are projected to have revenue 5 years out don’t fall under this category.
3.) 1 blue chip company because this stablizes your portfolio, while it also gives you that chance to outerform the S&P 500. Which should be the goal with a small account. Tech has been hot and will continue to be hot for years to come. I like Microsoft the most $MSFT, then Apple $AAPL, and Google, $GOOG.
Now you have a solid amout of money in the market which can make some serious gains on a yearly basis. Age is a big factor in determining how this porfolio should be split up.
If you’re in your 30’s with this account, taking a more moderate approach is in your best interest. Allocate around 50% to total market ETF’s. Anywhere in your twenties, taking a very similar approach as a sub $10k account is what I believe is the best option. 20%-30% dedicated to total market ETF’s
8 stocks max is best suited for this amount.
- 1-2 big ETF’s ($SPY, $VO, $FTEC)
- 3-5 High-growth stocks
- 2 Dividend, blue-chip, Stable Stock
- No REIT’s
- No Bonds
If you have this amount good for you! I sadly don’t have enough experience yet to give my opinion. I am not a licensed advisor and maybe you should seek one if you have serious questions on your portfolio diversity.
Remember this is not advice, just my opinion.
Subscribe to get access to a portfolio allocation sheet under the “Subscriber Content Tab.”