How Many Stocks Should I Own?

Good morning.

So yesterday, I discussed how much one should invest in a single stock.  Today, I’m going to talk about another query I get a lot from beginning investors: “how many stocks should I own?”

When you are first starting out, you may indeed wonder how many stocks you should  own in total.  The truth is, there is no hard and fast rule as to an ideal number of stocks to invest in.

I’ve heard some people say that owning too many stocks will minimize your chances of beating the market, because your portfolio will operate more like a mutual fund.  I have also heard investors say you should own at least 15 and no more than 20 stocks at any given time.

My belief, though, is that you should own as many as you can buy.  If that number is 15, 20 or 30, so be it.

The reality is that not all of your investments will be winners.  If you own 15 stocks, for example…5 may not do well at all, 3 may be so-so, one maybe very good, and one may be a home run.

That one home run, however, is all you need.  It is more than enough to make up for the underperformance you may experience with your other holdings.

For example, let’s say you have $1000 invested in 10 different companies for a total of $10,000.

Imagine a scenario where you lost 50% of your value in 9 out of the 10 stocks, which would value 90% of your portfolio at $4500.

However, let’s imagine that one of the companies you invested $1000 in was Netflix 15 years ago.  That $1000 would be valued at $360,000 today.

This is what i mean when i say you only need one winner!  You could have lost 90% of your investment and still done incredibly well.

Until next time…

How Much Should I Invest In One Stock?

A question I get asked quite often is “How much money should I invest in one stock when I’m first starting out?”

As a rule of thumb, the answer is “no more than 5% of your portfolio”.

However, this may not be possible if you’re starting out with an amount such as $500-$1000, as it’s very difficult to put $25-$50 in one stock.

In this scenario you would want to bump up your maximum initial investment to $100 per stock.

I understand that in most cases, this method will enable you to buy only one share of a particular company.  But starting out this way will allow to to diversify your bets and add to your positions over time.

Please check out The Stock Market is For Everyone for more tips like this.  And please share this blog with someone else today.  I’d like all of us to see financial freedom, and it starts with investing that first few hundred dollars.

Wealthy Joe Stock To Buy!

Good evening, all.

Every industry, at some point, will be transformed and disrupted.  One of those industries is healthcare.

Healthcare is a global, multi-trillion dollar industry.

One of the fastest growing trends in healthcare is telemedicine.  Telemedicine is when you visit the doctor remotely instead of going to the office.  This can be done using a desktop, laptop, tablet, or even your cell phone.

Remote medical visits are not for anything serious.  They’re for illnesses like colds and flu – situations in which, if you visited in person, the doctor would send you home and tell you to let it take its course.  Who wants to go out feeling awful only to be told to go back home and get some rest?

Technology has made telemedicine possible, and the timing couldn’t be better.

That’s why you should take a look at a company called Teladoc Health (NYSE:TDOC).  Teladoc is a $4 billion company, and the leader in the telemedicine space.

Here’s why:

  • People are living longer.  By 2035, people over the age of 65 will outnumber children.
  • 30% of doctors are baby boomers and will be retiring soon, causing a shortage of doctors.
  • Telemedicine has proven to be more efficient and cost-effective.
  • 4 out of 5 people over the age of 50 have a chronic disease.
  • 9 out of 10 people aged 60 or older have a chronic condition.
  • There were close to one billion primary care visits last year.

The demand and need for this service is definitely there.

Although telemedicine is not perfect, it should no doubt get better over time.

To read more about Teladoc, check out its website.

To learn how to get started in investing, check out my book, The Stock Market is For Everyone.

Stay healthy and get wealthy, everyone!  Until next time…

Disclaimer/Disclosure Statement: Information in this article is not intended to be a recommendation to invest in any stock.  Rather, it is presented for readers’ education and consideration when making their own investment decisions.  The author has no position in TDOC.

 

If You Own High Beta Stocks, Don’t Panic!

Good morning!

I want to take a short minute to talk about high beta stocks.

A high beta stock is one that has more volatility than the general market.  If the general market has a beta of 1, then a high beta stock would have a beta greater than 1.

High beta stocks will usually have moves much more severe than the overall market – both upward and downward.  For example, while NASDAQ is down about 11.5% from its all time highs, Nvidia (NASDAQ: NVDA) is down over 30% from its all time high.

Owning high beta stocks can make it feel like the market is doing much worse than it is.  But this is the nature of how these stocks trade.  So hold on and don’t panic!

If I could talk to 18-year-old me…

A-True-Story-of-a-Father-and-His-Son

Eric Today: Hey Eric!  I want to talk to you about something very important.  It’s something I wish I knew when I was your age.

Young Eric: What’s that?

Eric Today: I want to talk to you about the stock market.

Young Eric: OK.  What’s that?

Eric Today: The stock market is a place where you can invest in real companies and participate in their success. If the company makes a profit, you share in their success.  For example…,in 1975, eight years after you were born, we could have purchased $1000 worth of Walmart.

Young Eric: Really?

Eric Today: Do you know how much that investment would be worth today?

Young Eric: How much?

Eric Today: Close to $10 million.

Young Eric: WHAT?!?!  That’s incredible!!!  How?

Eric Today: It.s called compound interest, and it works wonders over time.  Each year, your money continues to grow from a bigger and bigger amount.

Young Eric: Wow!!!  OK…when can I start investing?

Eric Today: Now!  Save up $500, and then come see me so I can help you get started.

Young Eric: I most definitely will!  Thanks so much for sharing this information!!!

Should Millennials Only Invest With Robinhood?

Robinhood is the best thing to happen to investing since the inception of discount brokers.  The ability to buy shares for free is freakin’ awesome!

However…there is a very important point I want all you millennials out there to consider.

Unless you are Peter Pan, you won’t be 23 or 33 forever.  One day you’ll be 65 or older, and you’ll want to cash out your nest egg.  If you have all of your investment dollars in Robinhood, you are going to get killed with taxes.

I recommend opening an IRA with another brokerage for a portion of your retirement savings.  With a Roth IRA, you pay taxes up front and keep all the profits when you need the money the most, in older age.

The commission you pay upfront will be more than covered by the profits you incur over time!