How Many Stocks Should You Hold in Your Portfolio? I Own Over 100 Stocks

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I've received one question from other investors maybe more than any other question. That question is this: How many stocks should I own in my portfolio? How many stocks should be in my portfolio? It's a great question. Unfortunately, there's no "right" or "wrong" answer that applies to everyone.

However, there is a right or a wrong answer depending on what kind of investor you are and what your goals are. And that's exactly what I want to talk about today.

I'm going to tell you why I'm broadly diversified and own more than 100 different stocks in my personal stock portfolio. Now, this doesn't make 100 or more stocks the right number for you.

But I hope that sharing this information gives you some context to work with in determining your own proper level of diversification.

First, let me start by saying I believe in broad diversification within a stock portfolio. This belief is based on who I am as an investor and my goals as an investor.

I'm a dividend growth investor whose investing goal all along was to achieve financial independence and retire by 40 years old by living off of safe, growing passive dividend income.

With that in mind, broad diversification makes a ton of sense. There's very little cost. Yet a ton of benefit. Let's imagine you're living off of dividend income right now. Do you want all of your passive income to be dependent on just one, two, or even 10 companies?
If you own an evenly concentrated portfolio of 10 companies and one of
them has to eliminate their dividend, you're out 10% of your income.

How would you feel if 10% of your income just disappeared overnight? Probably not great, especially since I can guarantee you that 10% of your bills aren't going to just go away. Those bills are only going up.

If you own an evenly diversified portfolio of 100 companies and one of them has to eliminate their dividend, you're out only 1% of your income.

That's a massive difference. In this case, it would take 10 dividend eliminations by 10 different companies to put you in the same situation as the investor with a heavily concentrated portfolio and only one cut. There's simply a much larger margin of safety here.

And if you're investing in high-quality dividend growth stocks, the odds of experiencing 10 different dividend eliminations all in one go are highly unlikely. This is an amazing portfolio and income defense.

Diversification gets even better. You also get offense.

That's because even if you do experience an unfavorable dividend outcome or two in a portfolio of 100 stocks, you've got 98 or 99 other high-quality dividend growth stocks offensively increasing their dividends.

That means a cut or two barely even shows up on the radar, because the portfolio is so busy ballasting itself with dozens of other dividend increases. Before you know it, you're already back ahead of the game.

I'd know. My portfolio ran through the pandemic-induced crash last March. And guess what?

The income took a small licking, but overall kept on ticking - and then some. There was a small, temporary drop in income production from the portfolio as some dividend eliminations from even blue-chip stalwarts like Walt Disney (DIS) - rocked the boat. All the same, though, dozens of other dividend increases from incredibly reliable businesses like Johnson & Johnson (JNJ) - more than made up for it, quickly putting me ahead of the game and righting the ship. It was smooth sailing in what could have been very rocky waters had I went into that storm with a very concentrated portfolio.

Even with well over 100 stocks in my own portfolio, I can easily rattle off another 100 amazing businesses that I don't yet own a slice of. There are thousands of publicly-traded companies out there. I mean, the S&P 500 index, which is the market and kind of the gold standard these days, has 500 stocks in it.

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LEGAL DISCLAIMER: Please consult with a licensed investment professional before investing any of your money. Never invest in a security or idea featured on this channel unless you can afford to lose your entire investment. If your money is not FDIC insured, it may decline in value. Jason is not a licensed financial advisor, tax professional, or stockbroker and he does not purport to be. Links above may include affiliate commissions paid to the owners of Dividends and Income and help support this channel.

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