Select Page

How Many Stocks Should I Own?

Curated by the Ticker Table Team

It can be extremely tempting to try to buy and own a piece of all the stocks making headlines. The hottest themes heading into 2021 like electronic vehicles (EV), rare earth elements (needed for EV batteries), clean energy, iGaming, bitcoin and special purpose acquisition companies (SPACs) often trigger impulse trades often at the worst prices (highs). However, the most prudent thing to do is to avoid the “urge” to chase the “hottest” stocks because chances are you are experiencing the fear-of-mission-out (FOMO) which turns investing into a game of musical chairs, whether you know it or not. 

Investment Goals 

When asked what your investment goals are, the obvious answer is “To make profits, duh!”. However, that’s the surface level response on the same level as impulse trading. The real question is not just what your investment goals are, but how much risk you are willing to endure to reach those goals. Risk is exposure both in terms of position allocation and holding period. On the surface level, risk is simply how much “pain’ you can you stomach when your position go in the red (and deep in the red)? Everyone is a cool hand when their stocks are rising, but it’s a whole different story when they are sinking. With that in mind, let’s break it down into two parts.

Investment Goals

Define Your Investment Goals

Quantify your investment goals by percentages. Keep in mind, the higher your percentage goal, the more risk you need to be willing to take. For example, if you want a 10% return, are you willing to stomach and risk a (-20%) loss? This is to test your risk tolerance (pain) threshold. If you truly are willing to take that kind of a pullback then you’re risk tolerance is may qualify. To temper the pain, you should also ask yourself what is your holding time horizon? Short-term is a matter of days. Medium-term is weeks to longs. Long-term is years. The longer your time horizon, the more you can buffer some of the risk. 

Diversification Buffers Risk

To further buffer your risk, you should diversify your portfolio amongst different sectors and industries. There are 11 sectors in the S&P 500 index. You can spread the investment into multiple sectors or if you are very proficient in fundamental and technical analysis, then you can look to specialize in one or two specific sectors and industries. It boils down to how active or passive you will be with your portfolio.

Start By Investing In Companies You Like

Familiarity is the initial step. Be familiar with your stocks. If you are an end user to a service or product that you absolutely like, then research the company and familiarize yourself with its business model. Identify those companies that you are intimately familiar with as a consumer, study the fundamentals and technicals. Then consider investing in them. If you like 10 companies or 5 companies, spread out the risk by investing in more than one. Never put all your eggs in one basket! Diversify as you go.

Investing In Companies

Diversifying Your Portfolio

Diversification is a word you hear constantly when it comes to stock investing. Diversification means to spread out your risk by investing in multiple different sectors and industries. Of the companies that you like and are familiar with, start to determining which sectors and industries they are in. If you have two companies that both sell athleisure and sports apparel, then select one. Try not to have the same companies in the same sector and industry as they tend to move together and that defeats the purpose of spreading your risk. 

How To Diversify Properly

Determine your total portfolio allocation capital amount to stocks and then split that up into equal parts percentage wise. Be familiar with the 11 different sectors and the industries within them. Research how certain sectors historically correlate or diverge with other sectors. For example, utilities tend to rise in falling markets, but not always. Allocation percentages to the sectors and then add the stocks accordingly. Make sure you are familiar with the underlying companies. For example, allocating 20% of your stock portfolio between information technology, consumer discretionary, healthcare, financials, and utilities is a good start. Then you can populate them accordingly to sector and/or industry. If you can’t think of any stocks for a particular sector, you can always use a sector, industry or theme bases exchange-traded-fund (ETF).  You can adjust the allocation percentages throughout the year and rebalance as needed.

Benefits Of Diversification

When you diversify, you spread out your risk by giving yourself broad exposure to multiple sectors and industries. The portfolio can be less volatile enabling a more passive approach if you have a long-term time horizon. However, keep in mind this applies in rising markets. Falling markets can be a different story, therefore it’s important to adjust allocation to stocks versus fixed income instruments throughout the year. 

Downsides Of Diversification

While the volatility may be less, the upside is also spread out. By spreading out the risk amongst different sectors can buffer reversions and turbulence, a full fledged bear market sell-off can hurt your across the board. Therefore, diversification is not risk-free. The upward gains will be smaller, but the downside pain should be less as well. In uptrending markets, you will accumulate profits and should expect drawdowns in falling markets.

Specialization

If you are willing take on more risk for more gain, then a specialized investing approach may be for you. This is where you concentrate your portfolio around specific sectors, industries or themes, rather than diversifying broadly across different cross sectors. For example, you may be very familiar with electronic vehicles (EVs) or clean energy and decide to build your portfolio around this theme. 

Clean Energy

Benefits Of Specialization 

Specialization concentrates your investment around specific sectors/industries or themes. It’s more risk but can potentially offer more reward. It enables you to focus on quality over quantity and maximum upside potentially. However, it takes active research, analysis and trade management. This doesn’t mean jumping head first into any momentum stock and hoping it goes up. You should be invested in effort just as much as cash. You should know the current earnings and expectations as well as the longer time price trends and patterns of the underlying stock. 

Downsides Of Specialization

The downside to specialization is really putting most of your eggs in one basket. If you’re research and analysis is off, you can get pounded. If you are passive and don’t bother to stay on top of the news, catalysts and charts, then you are asking to get nailed when sentiment turns negative. Specialization should be limited to seasoned active investors. If you aren’t one, then start with diversification. 

How Many Stocks Should You Own? 

This depends on how many stocks you are familiar with and whether you are going to diversify or specialize. If you have to ask how many stocks should be in a portfolio, you are probably new and should start with diversifying. Filter down the stocks you know to a handful. Split the allocation evenly to diversify. Newbies should start with no more than five stocks spread across different sectors and industries based on the portfolio size. This doesn’t mean to invest your full portfolio split between a handful of stocks. Keep in mind that cash is a position as well.

Number Of Stocks

Always leave cash so that you can dollar-cost-average into positions. Smaller portfolios tend to benefit more from specialization while larger portfolios benefit from diversification. The larger your portfolio is, the more it can benefit from diversification (IE: a $1 million portfolio vs. a $1,000 portfolio). As you build up your portfolio, spread out the risk with diversification.

The #1 Investment of 2021

Our team has analyzed thousands of stocks in hundreds of sectors. Looking for stocks with massive growth potential? Check out the top stock pick for 2021.

Top Stock Lists

Best Stocks Under $1

Looking for the best stocks under $1? You came to the right place. Stocks that are priced at under $1 per share are often considered to be penny stocks. Stocks valued at under $1 usually belong to new and small companies, including startups. These companies and stocks...

Best High Short Interest Stocks

The total number of shares sold short without being covered, of a particular stock, is called the short interest of that stock. The short interest is represented as a percentage. Thus, stocks with a high percentage (usually over 20%) of short interest are termed as...

Best Coal Stocks

Stocks of companies involved in the mining of coal are known as coal stocks. A large number of companies across the globe extract coal from the earth, which is used to generate electricity. Despite the awareness about global warming and greenhouse gas emissions and...

Best FinTech Stocks

Stocks of fintech companies that implement digital technology to the financial world are known as fintech stocks. Fintech companies apply the advancement in technology to payment systems, e-commerce, cryptocurrencies, money transfers, personal finance, lending, and...

Best Transport Stocks

Stocks of companies that facilitate transportation are collectively known as transport stocks. They include stocks of railroad companies, railway operators, airlines, electric cars, freight carriers, transportation manufacturers, and logistics providers....

Best Telecom Stocks

Stocks of the companies involved in telecommunications constitute telecom stocks. They include stocks of companies that enable telecommunications on a global level, either through the phone or the Internet, wired or wirelessly. With the rapidly evolving telecom space,...

Best Infrastructure Stocks

Stocks of companies that build and maintain the infrastructure of a country, including communications, water, transportation, electricity, and buildings, are collectively termed as infrastructure stocks. It is a broad category of stocks consisting of building bridges,...

Best Index Stocks

Stocks of the mutual funds and ETFs that track and follow the performance of a stock market index are termed as index stocks. Index stocks provide diversification to the investment portfolio by spreading out investments across different asset classes. They also manage...

Best Electric Car Stocks

Electric car stocks are stocks of the manufacturers of electric vehicles. The sales of electric cars started in 2013 and have demonstrated a steady rally in the past few years. The sales of battery-powered cars will not overpower traditional combustion engine cars...

Best Microchip Stocks

The stocks of companies involved in the design and fabrication of integrated circuits or microchips are termed as microchip stocks. With technology so prevalent in our lives, microchips are increasingly used to program logic and for computer memory to be used in...

Best Clean Energy Stocks

Clean energy stocks are stocks of companies that generate and supply energy through renewable and clean resources. The clean energy industry and stocks have seen an uplift in recent years with worldwide initiatives towards clean and alternative sources of energy. The...

Best Agriculture Stocks

Agriculture stocks are stocks of companies involved in agriculture and food-related businesses. The agriculture industry has been around for more than 14,000 years and is here to stay. Despite the economic conditions of the world, the performance of agriculture stocks...

Best Penny Stocks

Penny stocks are the stocks that, by definition, trade at less than $5 per share. They belong to small-cap public companies, are illiquid, and are traded on the over-the-counter exchanges and not the regular stock exchanges. Penny stocks are highly speculative in...

Best Stocks Under $50

Stocks that trade at under $50 per share are termed as stocks under $50. In most cases, stocks under $50 belong to large, well-established companies and are available at a good discount. Thus, stocks under $50 offer excellent opportunities for investors to enter the...

Best Gun Stocks

Gun stocks are stocks of companies that manufacture and sell firearms and ammunition, including guns and pistols. There are not many publicly-listed gun stocks in the US. Only two manufacturers of firearms are listed on the US stock exchange, while a few other gun...

Best Foreign Stocks

Stocks of companies located in a foreign land are called foreign stocks. With the rapid advancement in technology, investing in foreign stocks and securities has become a lot easier. An investor in the US can invest in stocks of companies in Zambia, India, or China...

Best Canadian Stocks

Stocks of companies based in Canada are termed as Canadian stocks. A wide variety of Canadian stocks trade on the US stock exchanges and they belong to a variety of sectors, and industries. After the legalization of cannabis in Canada in 2018, stocks of cannabis...

Best Railroad Stocks

Stocks of companies that are involved in the transport of industrial and commercial goods through the rail route are termed as railroad stocks. Railroad industry forms an integral part of the US economy; hence railroad stocks provide investors with the opportunity to...

Best International Stocks

Stocks of companies based in countries other than the home country of investors are called international stocks. There are many foreign stocks, from Canadian stocks to Indian stocks, and many of these trade on the US stock exchanges. They are registered in the US and...

Best Insurance Stocks

Insurance stocks are stocks of the insurance companies that deal in life insurance, property or casualty insurance, accident and health insurance, surety and title insurance, and insurance brokers. Insurance stocks have experienced a sudden rally and outperformed the...

Top ETF Lists

Best Performing ETFs

ETFs are the pools of money that invest in a variety of stocks, commodities, or a combination of assets. They follow the performance of benchmark indices like the S&P 500 and are traded on the leading exchanges. ETFs are effective modes of investment for investors...

Best Financial ETFs

Financial ETFs are the exchange-traded funds that invest in the stock of financial services companies. These companies include banks, insurance companies, mortgage companies, investment banks, brokerage firms, and companies that provide consumer credit. The...

Best Water ETFs

Water ETFs are the exchange-traded funds that invest in water stocks or stocks of companies involved in the water industry. This includes companies that perform water purification processes, bottle the purified water, and other related products. Water ETFs provide...

Best Semiconductor ETFs

Semiconductor ETFs are the exchange-traded funds that invest in companies that manufacture semiconductors. It includes the companies that directly make semiconductors as well as the ones that supply goods to these semiconductors manufacturers. The semiconductors...

Best High Yield ETFs

There are many types of ETFs, from financial ETFs to energy ETFs, so what sets apart high yield ETFs? High yield ETFs are the exchange-traded funds that invest either in stocks of companies that pay high dividends or in bonds of companies that pay high interest. The...

Best Gold ETFs

Gold ETFs are the exchange-traded funds that invest in gold and gold derivative contracts backed by gold. Investors do not get physical ownership of gold by investing in or redeeming gold ETFs; instead, they only get access to the cash equivalent of the transaction....

Best European ETFs

The exchange-traded funds that invest in the stocks of Europe-based companies are termed as European ETFs. These ETFs not only allow investors to broaden their exposure and geographical diversification, but they also help investors to aim at specific industries or...

Best Energy ETFs

The exchange-traded funds that invest in the securities of energy companies, including natural gas, oil, and alternative energy companies like those for electric cars. The exposure also consists of securities of the companies that produce and transport energy...

Best Defense ETFs

Defense ETFs track the performance of equities of companies in the aerospace and defense sector. These companies include the ones involved in the manufacturing, distribution, and transportation of aircraft and their parts, radar equipment, military aircraft, and other...

Best Blockchain ETFs

Blockchain ETFs are the exchange-traded funds that either track the price movement of bitcoin and other cryptocurrencies or invest in stocks of companies that use the blockchain technology to transform business applications. With the technological advancement and...

Best 3X ETFs

There are many types of ETFs out there. They range from financial ETFs to high yield ETFs, and then there are 3X ETFs. 3X ETFs are the triple leveraged ETFs. These ETFs are designed to amplify the returns of the benchmark indices by three times by using financial...

Best Oil ETFs

There is such a large variety of ETFs that you can invest in. There's financial ETFs and Energy ETFs to name just a few, and then there are Oil ETFs. Oil ETFs are the exchange-traded funds that invest in the stocks of oil companies. They are simple and effective...

Best Biotech ETFs

The exchange-traded funds that invest in the stocks of biotechnology companies are known as biotech ETFs. Biotech companies are mainly involved in revolutionary processes in the healthcare industry, including genetic engineering, molecular biology, and recombinant DNA...

Best Tech ETFs

Technology ETFs are the exchange-traded funds that hold assets including the technology stocks.  Some tech ETFs own all the stocks that are related to technology, while others have a niche focus by buying only semiconductor stocks or only cybersecurity stocks....

Best Small-Cap ETFs

Small-cap ETFs are the exchange-traded funds that invest in the stocks of companies with a market capitalization between $250 million and $3 billion. The portfolio is diversified with small-cap companies and stocks belonging to different sectors and separate...

Best Healthcare ETFs

Healthcare ETFs are the exchange-traded funds that invest in the stocks of healthcare companies. Healthcare is the second largest sector among the S&P 500 index and is an excellent avenue for investments. By investing in healthcare ETFs, investors get to invest in...

Best Fidelity ETFs

Fidelity, the market leader in investment planning and financial services, offers a wide array of 28 ETFs for investors to choose from. The exchange-traded funds of Fidelity help investors create a diversified portfolio of investments by catering to different factors,...

Best Dividend ETFs

A dividend is defined as a distribution of reward from the company's earnings to its shareholders. Investing in dividends is one of the slower and more patient approaches one may take when considering their investments. This type of investing belongs mostly to a more...

Best China ETFs

The exchange-traded funds that invest in the stocks of China-based companies constitute China ETFs. These funds include both index funds and funds specific to categories and sectors. China ETFs have become new avenues of investments in the past few years as China has...

Best Vanguard ETFs

Vanguard is the second-largest U.S. exchange-traded fund (ETF) sponsor by assets. In general, Vanguard is widely regarded as one of the most popular ETF-issuers in the world. According to estimates, Vanguard has around $5.3 trillion worth of assets under its...