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ontario ashley | How many stocks should I carry in my portfolio? |
I am looking to invest long-term (20+ years) and this is my first time buying stocks. I have a medium to high risk tolerance. I will be initially investing $2500. The goal is growth for retirement fund.
Wondering how many different stocks to buy with my $2500.
Also, what would you say are good markets/industries to buy into now for maximum growth over the next 20 years?
Additional Details
I already have mutual funds... so I'm hoping to get into something with more potential payback (realizing the added risk also). |
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muncie birder
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To absolutely minimize your individual risk, the theoretical number is 20. Beyond that the risk reduction of added stocks is minimal. But with only 2500 you can not begin to approach that, but it is a goal. The fact that you currently have mutual funds does mitigate your risk somewhat. As one responder mentioned when you have more than 10 it becomes somewhat of a task keeping track of them. And with 10 your individual risk is only slightly more than at 20. I attempt to keep my portfolio below 20 but by tracking the portfolio with Yahoo, it becomes much more managable to track a larger number of stocks.
The key is not only having say 10 different stocks but they should also be distributed amongst various segments of the economy and across various economies (read countries).
What are good markets/industries for the next 20 years?
Think about India, China, oil, health care. An excellent way to invest in oil with a small amount of money is to purchase an ETF, such as PXE or XLE or IYE or VDE or IEO or PXJ or USO. XLE is the most popular.
For China there is also an ETF: PGE or FXI
Regretably there is not yet an ETF of Indian stocks but there are about 12 or 16 traded on the NYSE. There are a couple of closed end funds that specialize in Indian stocks.
For health care there is these ETFs: XLV, IBB, PPH, BBH, IHY, PJP, IHE, IHF, IHI, XPH, XBI. Seems like there are more ETFs than there are companies. ha ha. |
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Mike S
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Most would agree that you will eventually need a minimum of seven stocks. Best advice: Think long-term and buy quality companies with solid earnings. |
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OPM
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With $2500 you should only buy one and that one should be a equity mutual fund, preferably conservative because equity prices are high now and the goal should be to loose as little as possible until prices come down. As you add to it, and get to around $25,000 then you could build your own portfolio of 25 stocks of $1000 apiece. Below that the commissions will be too great and the costs too high to be worth individual investment. |
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Frank Castle
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For such a small amount I suggest ETFs. |
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mmf
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It depends on your trading costs. If your cost of trade is high then the ratio of turning over the stock(buy then sell) limits how many companies you can invest in effectively. with just $2500 and you already have funds I would put it into one maybe two and select a good midcap small company with huge growth potetential. The good thing is many prospectuses of smaller company funds list the top 20 or so companies they invest in and what percentage. find one or two companies and cross your fingers. If you pick well you will really grow this $2500 |
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paul m
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To diversify from risk recommend portfolio is 22. Although direct shares is the rikest you can buy (check beta values). To diversify risk and gain maximum growth there are many ISA's on the market ranging from FTSE 100 to China small companys equitys. These are delt with through a fund manager and is possible to have gains of 40% per annum (bearing mind they are volitile). These are also tax exempt saving plans, Although a yearly maximum is 7k per year (Maxi ISA) 4K Mini ISA.
Hope this helps |
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words_smith_4u
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Personally, I would get into a mutual fund instead of individual stocks. For your first time, realize that - if you pick a stock and they say or do something stupid (think Enron, WorldCom, Tyco, Adelphia), you lose it ALL.
A Mutual Fund will help you because it is targeted into a specific area of risk (Asia funds, Large Cap, Medium Cap, etc)
Best advise is to go to 'fool.com' and get some information on what they think is good. Remember, any advise here is from people working and not on some island, retired. So we don't exactly know the right answers either!
good luck |
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analyst
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Not more than ten stocks. It will be easier for you to monitor on a daily basis. |
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