How many stocks should you own? It's a bit like asking how many angels can dance on the head of a pin. There's no right answer. But that doesn't stop people from trying come up with one.
Buffett's oft-invoked "punchcard" idea would limit us to less than two dozen in an entire lifetime. If I played by Warren's rules, I'd be stuck with what I've got currently. Truth be told, if Warren played by that "rule," he might have been sitting on his thumbs long before he got a shot to buy all that cheap Coke (NYSE:KO).
You know the drill. If you buy too many stocks, you'll water down your big Taser International (NASDAQ:TASR) stake, and you'll end up simply bogeying the market, with more costs and work than you'd have incurred by just forking over for an index fund. Too few, and you've got no cushion to help you land softly when you take a big slide with Taser a few months later.
Some researchers have suggested that 15 to 30 stocks is more than enough diversification to keep you safe. Others say "poppycock" (such as the folks who want to sell you those index funds). But be careful--they might be basing the findings on randomly selected mini-portfolios. How many of you are going to pick your stocks as if you're grabbing minnows out of the bait pail?
For my part, I tend to avoid that discussion altogether. That's because I know the correct number of stocks to own. Here it is: As many as you can follow.
But let's be honest. It's not easy to keep track of even a small pile of stocks. There's TheSimpsons to watch, dogs to throw sticks for, the daughter's dance recitals to itch through, and so on. I fall behind on my stock homework pretty often, and it's my job to sit here all day reading this stuff -- interrupted, of course, by the occasional outflow of investment-related typo-babble like this.
One way I stay on top of things is to let other people do some of the work -- people I trust. Specifically, I offload a lot of the homework onto my fellow Fools and the Fool Community by investing in our newsletter picks. This is going to sound like a shameless plug, but it's the truth--so be it.
For me, the best part of a newsletter subscription isn't the picks. (And I believe I'm qualified to weigh in on this, since I was a customer long before I became an official Fool.) It's the continued scrutiny that the stocks get in the months to follow. If I want an in-depth discussion of the latest earnings report from death-care provider Alderwoods Group (NASDAQ:AWGI), I know I'm likely to get it on the boards at Hidden Gems. That's the same place I visit if I want to know how Middleby (NASDAQ:MIDD) is faring in this era of rising raw material prices, and rumored killer competition from hottie TurboChef (NASDAQ:OVEN). I get reasoned analysis without all the nonsense and namecalling found on the Yahoo! Finance boards.
If I want to know the story behind Annaly Mortgage's (NYSE:NLY) slick payout, and why its recent drop might not be as spooky as reported, I can get that with Mathew Emmert's mid-month Income Investor update.
Even the aforementioned Coke and Taser are Fool newsletter picks, having been recommended by Inside Value and Rule Breakers, respectively. You can check up on their progress if you're a subscriber -- or if you take a free one-month trial.
The most interested and engaged investor can use a little help with the homework. You get plenty of that here. And if you don't like what you see, you'll get your dough back. Take a look at our complete slate of Fool newsletters by clicking here.
For related Foolishness:
- There's a method to finding the next home run stock.
- Sweet, sweet cash is not only fun to collect; it's a great way to beat the market.
- Coke is just one example of the market's occasional dirt-cheap dream stock.
Seth Jayson will take all the free help he can get. At the time of publication, he had shares of Alderwoods Group and several other Motley Fool newsletter picks. View Seth's stock holdings and Fool profile here. Fool rules are here.
