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(11-08-2014, 10:25 AM)CityFarmer Wrote: [ -> ]
(11-08-2014, 10:13 AM)Bubbachuck Wrote: [ -> ]
(11-08-2014, 10:04 AM)CityFarmer Wrote: [ -> ]
(10-08-2014, 09:33 PM)Bubbachuck Wrote: [ -> ]Hi Experts,

I need a little advise about diversification. As I'm very new to investing and don't have a big capital to start with. In fact I only started about few months ago this year. Let's say for example a $10K capital. Any recommendation on how many stocks should I have in my portfolio and the percentage of allocation. I feel like if I over diversify, I can only gain a little. Perhaps at least $2K capital per stock? Thanks in advance.

Theoretically, you should achieve reasonable diversification with 5-10 stocks. Lower capital might take the lower end, in order not to over-dilute the effort, IMO.
Thanks Mod. Even for only 10K capital is it advisable to have more than 5 stocks?

It depends on the risk profile and objective

If the objective is to adopt a sustainable good habit of risk-adverse and long term, we should start from very beginning. All-in, or most-in might works in short-term, but we will never know the "unknown unknowns", let alone the "unknown knowns" due to skill level

Diversification in 5 stocks, means average 20% per stock, but it should be able to increase to 30% on one individual stock, depend on confidence level.

I am skeptical on all-in or most-in strategy, with more than 50% in one stock.
Thanks mod for the advise. Will take that in mind. Actually the reason behind my question is because I think I over allocate to two of my stocks. One is I feel "safe" and the other one I think is greed. I guess greediness is normal to begginers and this is the one I'll try to avoid and think more about the risks. Thanks. I think I know what to do now.
(11-08-2014, 10:25 AM)CityFarmer Wrote: [ -> ]
(11-08-2014, 10:13 AM)Bubbachuck Wrote: [ -> ]
(11-08-2014, 10:04 AM)CityFarmer Wrote: [ -> ]
(10-08-2014, 09:33 PM)Bubbachuck Wrote: [ -> ]Hi Experts,

I need a little advise about diversification. As I'm very new to investing and don't have a big capital to start with. In fact I only started about few months ago this year. Let's say for example a $10K capital. Any recommendation on how many stocks should I have in my portfolio and the percentage of allocation. I feel like if I over diversify, I can only gain a little. Perhaps at least $2K capital per stock? Thanks in advance.

Theoretically, you should achieve reasonable diversification with 5-10 stocks. Lower capital might take the lower end, in order not to over-dilute the effort, IMO.
Thanks Mod. Even for only 10K capital is it advisable to have more than 5 stocks?

It depends on the risk profile and objective

If the objective is to adopt a sustainable good habit of risk-adverse and long term, we should start from very beginning. All-in, or most-in might works in short-term, but we will never know the "unknown unknowns", let alone the "unknown knowns" due to skill level

Diversification in 5 stocks, means average 20% per stock, but it should be able to increase to 30% on one individual stock, depend on confidence level.

I am skeptical on all-in or most-in strategy, with more than 50% in one stock.

My view is with $10k of capital, it will be hard to diversify. I feel that the effort is too much for the diversified gain. Furthermore, the commission for trade will be high. Say you are buying $2k worth of shares, the commission is still $25 (before other taxes), that will be 1.25% for a buy, and another 1.25% for a sell. Buying into an ETF can be a better option.

If your capital is closer to $20K, I will suggest getting 3 counters of unrelated industries at $5-6k per counter, bringing the total commission below 1% for buy/sell. Keep the rest as opportunity fund.

Above is just my personal opinion.
(11-08-2014, 10:38 AM)Bubbachuck Wrote: [ -> ]Thanks mod for the advise. Will take that in mind. Actually the reason behind my question is because I think I over allocate to two of my stocks. One is I feel "safe" and the other one I think is greed. I guess greediness is normal to begginers and this is the one I'll try to avoid and think more about the risks. Thanks. I think I know what to do now.

Sharing a little story here.

I once talked to a regional top salesperson, in a MNC, what make his success? One point from his reply, was it is not the individual high-value order, but the sustainable average-value orders, that made his day, and made him stayed in the top position for years.

Wish you all the best on your value investing journey.
(11-08-2014, 10:40 AM)NTL Wrote: [ -> ]
(11-08-2014, 10:25 AM)CityFarmer Wrote: [ -> ]
(11-08-2014, 10:13 AM)Bubbachuck Wrote: [ -> ]
(11-08-2014, 10:04 AM)CityFarmer Wrote: [ -> ]
(10-08-2014, 09:33 PM)Bubbachuck Wrote: [ -> ]Hi Experts,

I need a little advise about diversification. As I'm very new to investing and don't have a big capital to start with. In fact I only started about few months ago this year. Let's say for example a $10K capital. Any recommendation on how many stocks should I have in my portfolio and the percentage of allocation. I feel like if I over diversify, I can only gain a little. Perhaps at least $2K capital per stock? Thanks in advance.

Theoretically, you should achieve reasonable diversification with 5-10 stocks. Lower capital might take the lower end, in order not to over-dilute the effort, IMO.
Thanks Mod. Even for only 10K capital is it advisable to have more than 5 stocks?

It depends on the risk profile and objective

If the objective is to adopt a sustainable good habit of risk-adverse and long term, we should start from very beginning. All-in, or most-in might works in short-term, but we will never know the "unknown unknowns", let alone the "unknown knowns" due to skill level

Diversification in 5 stocks, means average 20% per stock, but it should be able to increase to 30% on one individual stock, depend on confidence level.

I am skeptical on all-in or most-in strategy, with more than 50% in one stock.

My view is with $10k of capital, it will be hard to diversify. I feel that the effort is too much for the diversified gain. Furthermore, the commission for trade will be high. Say you are buying $2k worth of shares, the commission is still $25 (before other taxes), that will be 1.25% for a buy, and another 1.25% for a sell. Buying into an ETF can be a better option.

If your capital is closer to $20K, I will suggest getting 3 counters of unrelated industries at $5-6k per counter, bringing the total commission below 1% for buy/sell. Keep the rest as opportunity fund.

Above is just my personal opinion.

I agree with NTL. Unless you are using SCB, you will be incurring high commission if you buy too little.

As I'm not using SCB, I make it a point to buy at least $6k per counter.

What you can consider doing is to put half into the index and the other half into a counter.

It also depends on how much do you expect to see your capital increasing. At the end of the day, do take time to read up and learn more about the various stocks and determine which one seems like one that you feel confident about. There's no need to allocate now Smile
(11-08-2014, 06:17 PM)Ferns Wrote: [ -> ]
(11-08-2014, 10:40 AM)NTL Wrote: [ -> ]
(11-08-2014, 10:25 AM)CityFarmer Wrote: [ -> ]
(11-08-2014, 10:13 AM)Bubbachuck Wrote: [ -> ]
(11-08-2014, 10:04 AM)CityFarmer Wrote: [ -> ]Theoretically, you should achieve reasonable diversification with 5-10 stocks. Lower capital might take the lower end, in order not to over-dilute the effort, IMO.
Thanks Mod. Even for only 10K capital is it advisable to have more than 5 stocks?

It depends on the risk profile and objective

If the objective is to adopt a sustainable good habit of risk-adverse and long term, we should start from very beginning. All-in, or most-in might works in short-term, but we will never know the "unknown unknowns", let alone the "unknown knowns" due to skill level

Diversification in 5 stocks, means average 20% per stock, but it should be able to increase to 30% on one individual stock, depend on confidence level.

I am skeptical on all-in or most-in strategy, with more than 50% in one stock.

My view is with $10k of capital, it will be hard to diversify. I feel that the effort is too much for the diversified gain. Furthermore, the commission for trade will be high. Say you are buying $2k worth of shares, the commission is still $25 (before other taxes), that will be 1.25% for a buy, and another 1.25% for a sell. Buying into an ETF can be a better option.

If your capital is closer to $20K, I will suggest getting 3 counters of unrelated industries at $5-6k per counter, bringing the total commission below 1% for buy/sell. Keep the rest as opportunity fund.

Above is just my personal opinion.

I agree with NTL. Unless you are using SCB, you will be incurring high commission if you buy too little.

As I'm not using SCB, I make it a point to buy at least $6k per counter.

What you can consider doing is to put half into the index and the other half into a counter.

It also depends on how much do you expect to see your capital increasing. At the end of the day, do take time to read up and learn more about the various stocks and determine which one seems like one that you feel confident about. There's no need to allocate now Smile
Wow at least $6K per counter. I'll get there someday. Thanks ya'll for the advice.
Ok. After experimenting with my portfolio, and taking all your advices into considerations. I think I already found the strategy that fits me. And I finally came up with 3 counters (for now). Will only invest with a minimum certain amount of capital. Just keep it simple and focused portfolio.
(19-08-2014, 01:38 PM)Bubbachuck Wrote: [ -> ]Ok. After experimenting with my portfolio, and taking all your advices into considerations. I think I already found the strategy that fits me. And I finally came up with 3 counters (for now). Will only invest with a minimum certain amount of capital. Just keep it simple and focused portfolio.

My best wish to your newly calibrated portfolio.

As long as value investing principles are followed, I am pretty sure it will be a rewarding journey many years down the road...
Thanks mod. I'm lucky it was value investing that was first introduced to me and not the trader thing.
(19-08-2014, 04:08 PM)Bubbachuck Wrote: [ -> ]Thanks mod. I'm lucky it was value investing that was first introduced to me and not the trader thing.

The first thing I learnt was forex with TA and I tried $100 on it. LOL. After I lost the $100, I learnt something. Leverage is bad!

At least the $100 wasn't wasted.

Edit: Leverage isn't all that bad, but the leverage that the forex offered was 10x to 400x. I tried 400x and lost badly, then I tried 10x and discovered I could hold a bit longer, then I lost.
(19-08-2014, 01:38 PM)Bubbachuck Wrote: [ -> ]Ok. After experimenting with my portfolio, and taking all your advices into considerations. I think I already found the strategy that fits me. And I finally came up with 3 counters (for now). Will only invest with a minimum certain amount of capital. Just keep it simple and focused portfolio.


All the best in your investment journey! Big Grin
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