Hi Emily, sorry nobody has responded to you. Welcome!
Your question is very tough to answer which is probably why nobody has given you a direct response. Basically the answer will depend on several factors like your personal goals and age.
It’s important to understand why you are spreading yourself out, by diversifying your portfolio you are attempting to lowering the overall risk.
By choosing stocks in different sectors you are hoping that there will be fairly low correlation between them. If say manufacturing is going down 2% and tech is going up 3%, the change in your portfolio is going to see a gain of 1%, equally weighted. This movement then in your portfolio is less than if you were 100% manufacturing or tech. Doesn’t matter whether it is up or down, risk is measured by volatility, meaning how much something moves in price.
So in our example of an equally weighted portfolio of 2 sectors, we can see it is less volatile than owning just one. Why do I talk about this, because understanding the risk reward relationship is fundamental to investing.
If your goal is to buy a safe set of stocks and let your money grow. Then academically speaking you should be invested into a globally diversified portfolio of index funds. It’s been proven that it is extremely difficult to beat “the market” by stock picking over a long time period. “The market” is usually referring to an index like the S&P500 or FTSE100. Personally this is the strategy I follow for accounts like my pension and LISA.
However, my ISA is a different story. As we have talked about previously, the more assets you have, the less risk you take on and therefore less potential for a bigger outcome (again up or down). And there are essentially only two ways to outperform a market (again up or down). Number 1, use leverage and borrow money. Or number 2, reduce the number of stocks. With both you are increasing your level of risk and therefore potential return. So what I have done in my portfolio is reduce the number of stocks, picking what I think will be big winners in the long term. I have about 12 stocks, but I’m heavily concentrated into 1 of them. This is a high-risk strategy but could potentially yield much better results in the long term (I mean it has done already, but past performance is no guarantee of future performance).
Basically, you need to figure out what you want from investing. Are you seeking much steadier growth, or are you looking to take on more active risk by picking stocks. Dividend investing is also a popular strategy. You can lie anywhere on the risk spectrum, owing only index funds, a mix of index funds and stocks or just a single stock.
This is probably all a bit disjointed as I just wrote sort of what came to mind. Nothing I’ve said should be taken as advice. Just a starting point to investigate things more. Look into index funds and make sure you understand the risk/reward relationship with picking stocks.
Feel free to ask for any clarification on anything.
