Spreading yourself too thin or avoiding risk?

New investor here.

I’ve been building up my holdings and wondered what peoples opinions would be on the following…

Is it best to spread your investment over say 50 different holdings covering a wide range of sectors, or focus on a dozen well researched positions?

As a newbie, I feel lots of little investments reduces the risk of buying a lemon or being hit by one holding having a sharp fall, but not sure if this approach is correct.

Would be grateful of any advice.

If you don’t know what to do, buy indexes. Get in the market ASAP. Then as you learn you can start doing other things. You can research a company and if you think it’s a good investment you can add them in too, and start investing in it along side your indexes. Then you can decide on your strategy when you’re more experienced, whether index investing, diversification with single stocks, or high conviction.

The one thing I will say is nobody knows anything. There is no correct way, that’s for you to decide. So happy investing!


Depends on how much your investing, how long for and what the 50 investments would be.

I’d rather have more than less but researching the companies you invest in properly helps you sleep at night

This is the best advice I’ve ever heard and couldn’t agree more, learning all about trading, charts, spreadsheets means nothing when the stocks move without warning


I Invest in both ETFs and stocks.

If the efficient market hypothesis is perfectly correct then it should matter little what I do. Each stock should be perfectly priced and should be equally likely to underperform or outperform the overall market on a risk adjusted basis. People talk about how it is difficult to outperform the market. One can take comfort in the flip side of this. So long as one is not stupid, it is also hard to underperform.

Buying individual stocks has some advantages 1. Save on ETF fees, 2. I have a more varied portfolio of gains and losses, which means I can raise cash with less capital gains tax to pay, 3. I am not being double-taxed on dividends, 4. I can avoid stupid stocks and sectors that I don’t like or have ethical objections to.

But diversification is important and so a base of ETFs helps to give that.


I agree but if you want a hands off approach like that without the individual stocks then maybe a fund manager or investment group would be better suited? I did fidelity investments from 2003 and they always outperformed the market, in fact I managed to renovate my house at the time with just the profits.

Agreed. I also have some managed funds. They can be expensive for fees. But Fundsmith, for example, has done very well while I have held it. The fee is 0.9% but has been well worth paying.

I’m trying to learn the markets now like so many on here and the only way to do it is with the finger on the pulse, but it’s not for everyone.
Sometimes getting a statement telling you how well your fund manager has done can be better than watching the highs and lows and more lows daily for the 52 weeks or more

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Thanks for the feedback, some very interesting point - much appreciated.

I only hold around 5 - 6 stocks and 1 etf which is ishare clean energy etf, I reckon I have a higher risk tolerance than most. But I do recommend starting with etfs and just experince the market day to day and then expand upon that.

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I think I’m going to start adding etfs soon I think I’m missing out on some smart stock

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I hold about 75 stocks but that’s because am sticking to only investing money per company that i can afford to loose and being true to myself.

Please don’t take this as a financial advice

That ishare clean energy etf seems like a good place to start considering all the government regulations and a move to being carbon neutral

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Warren Buffett says: “Diversification is protection against ignorance.” He’s not the only one who doesn’t like diversification, and personally I also don’t like it either.

In my opinion, there is no correct approach, depends all on each individual. There are people doing great with few stocks, 50, 100 and so on… If you just started, I recommend going for indexes, and gradually research and buy individual stocks.

Now for the amount of stocks, I would say it’s better buying few stocks, easier to manage, more time to follow, research properly and so on. If I buy a stock, it’s because I did my researches and I believe it will do well, now, why would I pick 50 great companies when I can chose the best 10/12? It carries more risks because if one or few of them are bad picks, it will affect the return more significantly then it would if you had 50 stocks. But it is more rewarding, and all depends on each individual and how much risks they want to take. If you know what you are doing, you don’t need 50 stocks, 10/15 gives enough diversification imo. At the end of the day we want to buy the best.

Aaaaaamd then theres me with 3 stocks

But it works great for me :slight_smile:

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The good thing about holding higher numbers is when they climb and dip you can watch with your own small gains and losses and become part of the stocks life which in essence means you can begin to time the market with larger amounts