Page 1252 - How to Make Money in Stocks Trilogy

234 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

How Many Stocks Should You Own?

“Many investors over-diversify. The best results are usually
achieved through concentration, by putting your eggs in
a few baskets that you know well and watching them carefully.”

—WILLIAM J. O’NEIL, IBD CHAIRMAN AND FOUNDER

There is no magic formula that determines exactly how many stocks you
should own. But here are some basic guidelines to keep in mind.

■ ✔ Don’t own more stocks than you can handle properly and watch
carefully.

I remember talking with an investor at a Money Show years ago who told
me she owned over 60 stocks! Who has time to keep tabs on 5 dozen differ-
ent positions? Not me! And not anyone else I know at Investor’s Business
Daily either—including Bill O’Neil.
So before you jump in and start buying a bunch of stocks, ask yourself a
simple question: How much time will you realistically spend on investing
each week?
Let’s say you only have 10–20 minutes a day and some more time on the
weekend. That is definitely enough to go through the simple routines
(Chapter 4) and start generating good profits—if you limit yourself to a few
top-rated stocks.
Remember what I keep saying about keeping it simple. That also goes for
the number of stocks you own.
Start small. If you find you can handle more stocks down the road, fine.
But definitely don’t buy more stocks than you can manage successfully when
you’re just getting started.

■ ✔ Diversify for the right reasons.

Diversification is not a bad thing, per se. The problem is, too many
investors diversify for all the wrong reasons—and that’s what gets them into
trouble. Here are some examples.