Ibrahim Özcan: Everything from 3 -10 positions is sufficient as a value investor. Just be thorough in your analysis, risk assesment and margin of safety. You want to make a possible 10-bagger count.
Volkens Elizort: I was thinking of that yesterday. I want around 10 diff positions to hold. But my concern is the valuation for my seventh may not be as solid as my third.
Ibrahim Özcan: Well then just don’t buy and wait for better opportunities – is what i would do
Maximilian J Witherell: Depends on your odds on being wrong on a given choice.If you have a solid track record of nailing a single company, or five, then as long as that run continues you won’t need to be spread thin.If your track record is less consistent, spread bets enough so that one 30-50% loss on a company wouldn’t wipe you out, but keep a low enough spread that each well-performing bet will have a large impact.
Maximilian J Witherell: For example. If you are in 30 companies, can you truly expect a 20% return from the entire portfolio? Walter Schloss did it with an average of 100 companies in his portfolio, so it’s not impossible.But, for some people it’s easier to make 5 right calls a year than 100.
Ibrahim Özcan: Schloss also came to my mind, but do you think one can find 100 truly undervalued opportunities simultaneously nowadays?
Maximilian J Witherell: Ibrahim Özcan Not this year. The odds will invert at some point!
Shane Stafford: I think that diversification is important but too much equities diversification can water down returns. I currently have about 4 stocks in my portfolio, ranging from an ETF to a construction and cement supplier.
Volkens Elizort: How strong is your circle of competence for those last two companies?
Shane Stafford: The ETF I invested in is a low cost index fund and was my first investment. The other company I have good knowledge on as they are an Irish multinational (I’m Irish myself) and I have some knowledge of the construction sector. A lot of my information o…See more
Rishi Joe Sanu: Diminishing returns. Reaches index funds levels around 20
Maximilian J Witherell: Two words: Walter Schloss
Sally Nursten: Diversification is essential in spreading risk and getting great returns. I have 32 stocks in my portfolio – all value stocks but spread across many markets, sectors and currencies. It means I only risk 3% of total value on any one stock. Am 70% up, nudging 20% annualised. My worst performer is 50% down. But that doesn’t matter because I have several double baggers hence the returns.
Volkens Elizort: Wow, 32 is a really a high number. How do you keep track of all of them?
Sally Nursten: I use software called Stride. Www.stride.ws.
Value Investing Software & Stock Picking Tools | STRIDE
Sally Nursten: I definitely wouldn’t have time to monitor so many without tech. What do you use?
Volkens Elizort: Okay. Looks helpful. I use amigobulls.com to look at all the financials.
Stock Market Analysis, Latest Stock Market News – amigobulls.com
Volkens Elizort: How long have you been investing?
Sally Nursten: Three years. Was a property investor but returns were disappointing. This is much better and so much more interesting.
Volkens Elizort: Any advice for a 22 yr old investor looking to invest long term?
Sally Nursten: If you’re a value investor you’re already doing the right thing. I wish I’d started at 22! Cast a wide net. I can highly recommend stride as a stock picking / portfolio management tool – and go for a trading account that allows you to buy global stocks, particularly micro caps in Asia ( providing the are great value plays, always).
Alex Makino: Just wondering Sally Nursten – how much does it cost to use Stride? I looked through their website and just wondering
Sally Nursten: Hey Alex. Here’s the link to the Stride pricing page. https://www.stride.ws/pricing
Value Investment Software – Schedule a demo | STRIDE
Rob Urban: I hold 15 positions when fully invested and less as stocks get fully valued. Any more and its much harder to follow without diluting performance. I buy mostly high quality stocks with some deep value sprinkled in.
Michael Morse: Most people who think they are divetsed are not actually diversed enough.
Daniel Mayo: The amount of diversification you should have is inversely proportional to how much work you are willing to do and how much volatility you’re able to deal with.
Sanjay Prajapati: Gud
Ken Faulkenberry: The current trend is to toward over diversification. Studies show that 15 -30 individual investments provide sufficient diversification to mitigate risk (the reason for diversification). This will explain it better: http://www.arborinvestmentplanner.com/over-diversification/
Over Diversification: Hurting Your Investment Returns? – Arbor Asset…
Michael Morse: You don’t know the “value of diversification until you hold +25 different stocks. You will see a different market than you see with just 10-15 stocks.
Daniel Mayo: Ken Faulkenberry, would you elaborate on what exactly “sufficient diversification to mitigate risk” means?
Ken Faulkenberry: The above post explains your question in detail.
Ken Faulkenberry: You may also want to read about unsystematic risk: http://www.arborinvestmentplanner.com/systematic-and…/
Systematic Risk, Unsystematic Risk, Probability, and Expected Value -…
Shane Stafford: In the value investing world, I have found 2 different opinions on the matter. John Boggle the founder of vanguard argues that a lot of diversification can help you find that “needle in the haystack” and Joel Greenblatt, author and hedge fund manager argues for diversification in asset class rather than in a stock portfolio as it can dilute returns
Ken Faulkenberry: We need to take into account that Bogle sells index funds (not that there is anything wrong with that 😉 ) If you find that “needle in the haystack” its not going to make much difference if you have 150 stocks in your portfolio.
Michael Morse: Not all of them will be offering sale prices…therefore if you want more…you’ll have to pay up instead of getting bargain prices. You’ll hace more choices if you have more than 15 stocks in your portfolio.
Ken Faulkenberry: You’re exactly right Michael. One of the big advantages to a small portfolio is the ability to stick to bargain prices only. That increases your long term returns!
Sirius Canar Dar: Depends on your trading style. But in general, if you are picking your own stocks, don’t over diversify or you might as well be buying a well diversified ETF, as it will save you in fees.
Guille Ggh: Kelly Criterion
Punit Jain: Stay as concentrated as possible.
Eir Hsan: Concentration! we can make more money with concentration….See more
Eir Hsan: Concentration! we can make more money with concentration.I currently have 3 stock in my entire portfolioEach year I only need to find one great value stock, and fully load it.
Eir Hsan: I think I want to own between 15 to 20 stock… But I will only buy 1 stock each year…