How many stocks to own in your trading portfolio?

Dear friends,
Recently, I was reading a finance blog recommending investors, that it is ideal for a retail investor to have at least 40-60 open positions in their portfolio for proper diversification and wealth building. Later, that evening I was reading Mark Minervini saying that the maximum positions he has at any given point of time is roughly between 5- 7. 

What a stark contrast between a blog that recommends having a portfolio of 40-60 stocks for diversification and Mark Minervini saying that he never exceeds more than 5-7 positions at any given time. 

This made me think “How many open positions is ideal for a positional trader to have in his portfolio?”. When a two time winner of the US investing championship says that he has very limited open positions at any given time, it has to be taken seriously. However, I thought that it would be better to check in a mathematical way, whether the number of open positions at any given point of time has an impact on the growth of account size and profitability.

In this article, I am going to analyze how having lesser / concentrated open positions have a remarkable outcome in our stock market investing and how it helps us to grow our account quickly. I will also share my thoughts on the things to be considered while having a lesser / high concentrated position. Read more...