One common question retail investors have is just how diverse a portfolio they should own. With their limited dollars, is it better to hold a few larger positions or many smaller ones? Thanks to Motley Fool co-founder David Gardner and Dave Kretzmann, the world has a starting point for these discussions: the Gardner-Kretzmann Continuum. Simply put, divide the number of different stocks you own by your age. A good DKC number ought to be greater than 1. But in pursuit of that, what's the best what to divvy up your investable money?

In this mailbag segment of the Rule Breaker Investing podcast, Gardner and Kretzmann reply to a pair of listeners, and weigh in on adding to winners, buying in thirds (or more), and other vagaries of portfolio crafting.

A full transcript follows the video.

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This video was recorded on Nov. 28, 2018.

David Gardner: Rule Breaker mailbag items No. 6 and No. 7. We're going to combine two here because we're about to talk about -- oh, my golly, is David Kretzmann in the studio?!

David Kretzmann: Oh, yes!

Gardner: We're about to talk about the Gardner-Kretzmann continuum.

Kretzmann: GKC, baby!

Gardner: It's one of the most important investment developments of 2018. I think we've talked about that previously on this podcast. Any regular listener knows what the Gardner-Kretzmann continuum is, but I'm sure we have some new listeners this week. David, before I read these mailbag items, can you briefly summarize the GKC?

Kretzmann: All you have to do is take the number of stocks that you own. For example, let's say you own 50 stocks. Divide it by your age. Let's say you're 25. 50/25, your GKC score is two.

Gardner: Which is a huge number. I think most people don't realize that they could own that number of stocks, or they might think it's crazy to own 50 stocks at the age of 25. Although, David, I think you have maybe even a higher ratio?

Kretzmann: I think it's over 70. I'd say my ratio is probably closer to three. The agreement that we've come to over the course of the year discussing after creating the GKC score, David, is that we want your GKC score to probably be at least one or higher. Just a rough barometer to follow as an investor.

Gardner: Love it! That's a quick introduction. Now, mailbag items No. 6 and No. 7. This first one comes from Jeff Brown. Jeff writes, "Greetings. I've enjoyed the RBI podcast along with most of the other Motley Fool podcasts for the last few years since I started listening to podcasts. I have a long commute," Jeff writes, "and they help me pass the time in an informing and amusing way. My one complaint is that I no longer listen to as many audiobooks as I did before podcasts." Hmm. Kind of makes sense to me. There's only so much time.

"I was temporarily relieved to hear about the GKC," Jeff goes on, "as I thought of myself as a hoarder of companies." Best type of hoarder to be, at least! "I'm turning 53 this month. I figured I've probably had investments in about that many companies. I hadn't counted them in a long time as my portfolio grew enough not to worry so much about diversification. I was a bit surprised, though, to count 76 different companies, plus about 15 funds. Most of these were recs from Hidden Gems, Stock Advisor, and Rule Breakers. I still think I have a bit of a hoarding issue, as I love buying into new companies then benefiting from their growth and getting a bit of a kick out of telling my family, 'Hey, we own such-and-such company,' when we come in contact with a product or a service that one of them provides.

"My question is related to adding to winners. I would like to get your thoughts on two common guides mentioned by The Motley Fool and how these relate: adding to winners and buying in thirds." We're going to get to that in a sec. That's one question.

Also to the GKC, mailbag item No. 7, Pedee Ewing coming back, pointing out we may have mispronounced Pedee's name previously. We do make a big effort, David, to nail people's pronunciations.

Kretzmann: We try very hard, but we don't always get it right.

Gardner: It's spelled Pedee. You went with?

Kretzmann: Pedee.

Gardner: Right. But we received this mailbag item, and PD is pointing out it's just pronounced like PD. So, that's what we're going with this month.

Here's the question. PD starts, "Thanks for your wisdom and caring. You're truly improving the lives of your fellow man." Well, that's a wonderful thing to hear! Thank you very much, PD! "I'm curious as to the ideal size of a position. I'm on track," PD writes, "to have my GKC index at one with 27 different Stock Advisor starter stocks and new picks. Once I reach this goal, each position will only be one or a few shares for each of those 27. As I add more new picks, what's an ideal approach to position size, etc.?"

Both of these questions are about the GKC. David Kretzmann, illuminate!

Kretzmann: This isn't the best, clearest answer, but I'd say it really does depend on your situation. These two listeners writing in, it sounds like they're at a stage of their lives, certainly in PD's case, where they have years in front of them to invest. They'll most likely be adding new capital to the amount of cash that they're adding to stocks.

Gardner: I also want to say that Jeff Brown, our first guy, is 53. I sure hope, since I'm going to be turning 53 this coming year, that he also has years and years to invest.

Kretzmann: Absolutely, yeah, decades to invest! We're optimistic here. We're talking here about people who will be adding new money to their investments for years to come. In that situation, position sizing today isn't quite as important. If you have new money to add, you can start a smaller position, follow the company and add to it over time. If you're someone who's closer to retirement, or you're dealing with a fixed amount of dollars, you're not necessarily going to be adding new cash to that, then you probably do want to think more about, "I'm going to stick with a specific number of stocks I'm going to target in allocation, whether it's 2% or 5% or 8% for each position." In this case, especially if you're starting out and just adding a couple of hundred dollars a month or every couple of weeks, whether you're trying to save up to invest a bigger amount in one stock or investing a little bit over one or two or three stocks, I'd lean closer to the latter category. Obviously, with my GKC score around three, I must lean in that direction. But if there's a stock that I like, I'll typically start a small position, probably less than 0.05% of my portfolio. A very small percentage of my portfolio.

Gardner: You're just getting in the game, it sounds like.

Kretzmann: Yeah. Getting some skin in the game, following along. And there will be companies where I probably added to them over 10 times over the past 18 to 24 months.

Gardner: That's great!

Kretzmann: And then there'll be some companies where I buy them once and it's like, eh, I'll just leave that, I'm not necessarily going to return to it. It's really going to depend on each investor's circumstances, your risk tolerances. I know, David, in your case, you've recommended some companies like Intuitive Surgical six times, you've recommended others three-plus times. We're not necessarily saying to only buy in thirds. You don't necessarily need to only buy a company three times. Again, it comes down to each person's circumstances, their risk tolerance. I'd say it's good for an investor to reflect on the volatility that we've gone through in the stock market this year. I know I personally have seen some of my bigger positions in my portfolio drop 30-50% over the course of the year. A lot of that happened within the past month or two.

Gardner: Yeah, I feel you.

Kretzmann: Reflect on that, and think, how comfortable are you with a bigger position in your portfolio dropping like that? Do you wince? Do you sleep at night? If so, you probably want to aim for a slightly smaller position size for any given stock in your portfolio. On the other hand, if you're someone who has a stock that's 10-15% of your portfolio, it drops by 30%, and you don't flinch, then you're probably someone who can tolerate a bigger position size. Again, it really is a range for each person.

Gardner: Well put. David, you're in your mid-20s. Talk to me about 2019, if you were just guessing. From your GKC of approximately three, we'll just say you have around 75 comes in your portfolio, with the money that you save next year, how much of that money will go toward existing positions? And how many new stocks do you see yourself buying? I realize we're just making it up, but give us a general guide for how a guy with an extremely high GKC thinks about investing in the year ahead.

Kretzmann: I'd say I'm increasingly prioritizing, adding to existing positions. The majority of the cash that I have available to invest will go toward stocks I already own. In this case, let's say 60% plus of cash next year that I have to invest will go to positions that I already own. Next year will be an interesting year. We have a lot of exciting IPOs on the docket potentially -- Uber, Airbnb, Slack, a lot of higher-profile IPOs coming in 2019, similar to what we've seen in 2018. It'll be interesting to see some new companies hitting the public markets. But yeah, in any case, I would say the majority of the new cash I do have available to invest, I prioritize stocks I already own, but then leave a little bit on the side to start positions in companies that have struck my fancy and maybe hopefully will add to down the road as well.

Gardner: Awesome! There you go, mailbag items No. 6 and No. 7 on the GKC. It's really a story of portfolio crafting. There's no one-size-fits-all, cookie-cutter answer to how to build a portfolio. A lot of it does come down to key factors like your age, your enthusiasm, and how much money you have coming in. Once you do math around those, then you just ask, what am I working toward? What does my portfolio look like 10 years from now? Do I want to be tracking dozens of stocks? Do I like to spread my money out that much? Do I want to focus some? Even the answer that you have today may change 10 years from now. You may have something different in your mind at that point. It's all about evolving and adapting as we go. That's what we're here to help with here at Rule Breaker Investing.