How many stocks should you own in your Confident Investor portfolio?

It is important for any investor to be diversified in a range of stocks that fall in different industries. This way you are not doubling up on your risk for a segment disruption. In order to do this, you should probably have at least 20 stocks in your portfolio once it is at least partially developed.

I need to stress that last part a bit more, full diversification is not necessarily possible until your Confident Investor portfolio is at least partially developed.

As I explained in an earlier article, you should break up your portfolio money into 10 or more allotments. This means that you can have 10 different stocks fully invested at any given time.

At any given time, there are about 50 companies that are on my Watch List on this site. Not all of these companies are going to be experiencing upward momentum (a bull market) at the same time. Perhaps only a fraction of them are moving up, these are the companies that you will invest in using my Grow on Other People’s Money (GOPM) methodology.

As an example, lets assume that 7 companies are increasing in value at this time and you have divided your portfolio into 15 allotments of $6,000 each. That means you will have $42,000 invested (7 x $6,000). You will also have $48,000 sitting in cash waiting for another company to start increasing in price. As time progresses, one of these 7 companies starts to drop in price and the indicators I describe in my book, The Confident Investor, tell you to sell.  You sell enough stock in that company to recoup your original $6,000 and are left with 24 shares of the stock that are free and have not cost you any money.

Over time you will find that you have invested in many of the 50 companies on the Watch List. You will still have your $90,000 in cash but you will also have differing amounts of free stock in each company. This stock was paid for with Other People’s Money and it is now growing in your account.  In some companies you may only have 1 or 2 shares but in other companies you may have hundreds of free shares. At this point, you will find that you are quite diversified since you have free shares in several dozen companies.

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