A Personal Perspective on Building a Smarter Portfolio
By Steven Bernstein, President of Stonewater Financial
When I meet with new or do-it-yourself investors, especially those just starting out, one of the most common questions that comes up is:
“How many stocks should I own?”
Interestingly, even experienced investors often ask the same question. It’s a straightforward one, but a valuable one at any stage. And it’s entirely fair, given the overwhelming amount of information out there, it’s easy to either overcomplicate or oversimplify the answer. In truth, the ideal number of stocks depends on a few personal factors, but there are key principles that apply to nearly everyone.
Why This Question Matters
The number of stocks you hold is a simple question but opens the door to a fascinating debate. Too few stocks and you may have exposure risk for wild swings. Too many stocks and your portfolio becomes a mirror of the S&P 500, difficult to manage and unlikely to outperform. So what’s the right number?
According to ChatGPT, a Good Rule of Thumb: 15–30 Stocks
Is that the right answer? In my experience, the number of stocks most individual investors hold depends on a variety of factors. Here’s why a personal assessment is important.
- It provides enough diversification to reduce the risk of any single holding derailing your performance
- It allows for a mix of sectors and industries
- It’s a manageable number to research, track, and rebalance periodically
But here’s where it gets interesting: some of the world’s greatest investors, Warren Buffett, Charlie Munger, and Peter Lynch didn’t always aim for diversification. They aimed for intelligent concentration. They owned fewer stocks, but knew those businesses inside and out. As Munger famously said, “The idea of excessive diversification is madness… It’s a confession that you don’t really understand the businesses you own.”
So the real answer isn’t a number, it’s a mindset.
If you want your portfolio to reflect your best thinking, then ask yourself:
How many businesses can I understand deeply enough to invest in with conviction?
For some, the answer might be 10, for others 100, but the goal isn’t to own everything, it’s to own enough of what matters and to know why you own it. In addition, taking a small position in a risky endeavor could pay off.
Even if your portfolio includes 100 stocks, you may still want to allocate more of your investment dollars to the strongest performers or most promising leaders.
If you’re investing through ETFs or mutual funds, you’re likely already diversified, and the number of individual stocks you own may matter less.
Factors That Influence the Right Number For You
1. Your Time & Interest
If you enjoy following markets and analyzing businesses, you may feel comfortable owning 25–30 stocks. If not, keep your portfolio mainly in index funds or ETFs may be a more prudent approach.
2. Portfolio Size
Your portfolio size matters as well. Whether managing a $100,000 vs $1,000,000 portfolio will help understand how many names you should own. Imagine a split across 25 names gives you a wildly different amount invested in each company. If you’re working with a smaller portfolio, you’re not building meaningful positions for it to be worth considering so many individual positions.
3. Your Risk Tolerance
Are you comfortable with volatility, or do you prefer stability? More diversification (i.e., more stocks across sectors) can help reduce risk.
4. Sector & Style Exposure
Momentum can be your friend. Sometimes leaning heavily into a single theme, tech, energy, financials, etc. has the best outcome. However, with 20 stocks, if 15 are all in one sector, you’re not truly diversified, and when the tables turn you can get the biggest spanking of your life.
Where I See Investors Get It Wrong
Over the years, I’ve seen both ends of the spectrum:
- Investors who concentrate too much, with 5 or 6 high-conviction picks that expose them to major downside
- Others who over-diversify, owning 200+ names with overlapping risk and no real strategy
Both approaches can dilute performance and clarity.
So what should you do about it?
Let Your Winners Win… Until the Thesis Changes
A portfolio isn’t a trophy shelf; it’s a garden. Some plants need pruning, others deserve more sunlight. The classic rule “cut your losses quickly and let your winners run” doesn’t mean watching Nvidia or Netflix balloon unchecked. It means:
- Stay thesis-driven, not price-driven. If the fundamentals that put a stock in the portfolio are still intact—or improving—there’s no moral victory in shaving it just because the chart looks elevated. Momentum can keep working longer than most investors expect.
- Re-underwrite your winners. A stock that has doubled deserves a fresh research pass. If the growth drivers are accelerating (think AI spend for NVDA or subscriber upside for NFLX), a larger weighting may be warranted even if it feels uncomfortable.
- Reallocate only when concentration breaks your risk guardrails. A 3% position turning into 9% isn’t automatically a problem; it’s a signal to review the business case and your own risk limits. Trim because the thesis deteriorates or your exposure is outsized, not because “it’s had a good run.”
Conversely, losers rarely age like wine. If a position is down and the original catalyst is gone, it may be time to exit decisively and redeploy the capital. Lingering out of hope ties up resources that could fuel the next winner.
So… How Many Stocks Should You Own?
If you’re managing your own investments, 15 to 30 well-chosen stocks is a smart starting point. It’s enough to spread risk and capture opportunities, without getting overwhelmed.
But remember: the goal isn’t just to own more stocks. It’s to own the right ones, with the right allocation, for the right reasons.
At Stonewater, we help clients align their portfolios with their broader financial picture, whether that means managing individual equities, building tax-efficient strategies, or taking a more passive approach with ETFs and custom portfolios.
If you’re unsure whether your current portfolio is working as hard as it could be, or you’re wondering if it’s time to rebalance or reassess, we’re here to help.
Ready for a Second Opinion?
You don’t need to figure this out alone. Whether you’re just getting started or looking to refine an existing strategy, our team is here to guide you with clear, thoughtful advice tailored to your goals.
