Mental Models discussed in this podcast:
- Concentration vs Diversification
- Hurdle Rate
- Circle of Competence
- Conviction
- Opportunity Cost
- Satisficing
Please review and rate the podcast
If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience.
Follow me on Twitter and YouTube
Twitter Handle: @TreyHenninger
YouTube Channel: DIY Investing
Support the Podcast on Patreon
This is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at DIYInvesting.org/Patron.
Show Outline
The full show notes for this episode are available at https://www.diyinvesting.org/Episode120
How many stocks should you own?
- As many as you can that meet your hurdle rate?
- Only the best opportunities available?
- Optimal vs Satisficing
Constraints on Holdings:
- Time
- Circle of Competence
- Conviction
Additional Thoughts
- Collector of Businesses
- Hypothetical:
- What is the highest level of concentration an individual investor should be willing to place into a single stock (when buying?) Specifically, asking about non-special situations, more long-term holdings. Presumably, at some point, cat-risk is too high even when you have an edge.
- Imagine you own a 5-10 stock portfolio. Over the weekend, it is announced that all 10 companies are merging and will be subsidiaries under a single capital allocator that you like. Do you make any portfolio changes? You still own the same companies, but now 1 stock, not 10.
- What are you buying when buying a stock?
- Concentration: " The number of stocks you own is dependent on how you view yourself as an investor."
- Is it possible to produce alpha?
- If yes, concentrate
- If no, diversify
- Are you a good investor?
- If yes, concentrate
- If no, diversify
- Conviction
- If yes, concentrate
- If no, diversify
- Is it possible to produce alpha?
Summary:
How many stocks should you own? This is a critical question without a single answer. Your portfolio concentration is constrained by time, circle of competence, and conviction.
Popular Podcasts
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.