I back tracked my stock portfolio in my first year of stock investing versus my current stock market trading and found out that my stock portfolio initially was over diversified. I have around 10-15 stocks even though I just have around few thousands of money in COL account. I even by stocks at around 2,000 which I realized later that shouldn't be the case in buying stocks (See Basic Lesson 9). The way I see things before is kinda different compared today. Before, I was trying to save money by investing in stocks and because of that, I was so afraid to lose my money hence the reason of buying a lot of stocks under different industry. I don't know how to choose stocks back then as I am just relying on COL investment guide and which ever stock is popular.
Currently, I am not already saving money by investing in stock market instead I view stock market as a business and plausible alternative source of income. This time around, I fund my COL Financial Account to save and earn income in stock market.
Below are my opinions about highly diversified stock versus concentrated stock:
Currently, I am not already saving money by investing in stock market instead I view stock market as a business and plausible alternative source of income. This time around, I fund my COL Financial Account to save and earn income in stock market.
Below are my opinions about highly diversified stock versus concentrated stock:
Highly
Spread Stock Portfolio (Diversified):
Pros / Cons:
-
(Cons)
If stock is purchased in small amount such as Php 5,000.00 only then the break-even
is around 1.40% increase in price. Even at 10% increase in price, the net gain
is less than Php 500 which is way insignificant to consider when realizing a
gain. I say highly spread stock portfolio prohibits quicker realization of
gain for me.
-
(Pros)
Highly spread stock portfolio saved me from the financial crash for incurring
significant loss. If it is hard to realize gain from highly scattered portfolio
then it is also the same with loss. Fortunately, some of my stocks are
recovering already from the financial crash (August 2015).
Concentrated
Stock Portfolio (Selected Stocks):
Pro’s / Con’s:
-
(Con’s)
Highly concentrated stock portfolio is exposed to a much higher and greater
risk. You have to be equipped in stock market such as TA & FA knowledgeable.
- (Pro’s)
Highly concentrated stock portfolio is also good in quickly realizing gains. I
think the risk can be mitigated by closely monitoring the movement of
stocks. I can cut-loss if necessary while exposing myself to a higher
opportunity to earn profit from stock market.
Currently, stock portfolio is limited to at most 5 stocks as I am engage in stock market trading. I believe that I have the basics of Technical Analysis and Fundamental Analysis including controlled emotions during ups and down of stock market.
Good Luck!