Here is how I would decide how many stocks to hold:
As all matters regarding personal finance, it would depend on the individual. A number that would be suitable for one person may notbe suitable for another.
1) Risk tolerance: How are you able to take loss? Are you fine with losing 100% of your investment? [Thinking] Or is any number in the red going to give you sleepless nights?[Gosh] Diversification with more stocks would reduce concentration risk but would likely reduce your upside. After all, fortune favours the bold! 📈[Miser]
2) Investing skill and experience: Are you an expert in your field, allowing you to find market opportunities that the average person cannot spot? [Thinking] How long have you been invested in the stock market? How good are you with numbers? A newbie would have a higher likelihood of making mistakes like falling for value traps or FOMOing. [OMG] This would reduce their winning probability per stock. Therefore, it would be wise for them to hold more stocks. A wiser and more experienced investor would be able to hold fewer stocks to attain a higher likelihood for higher returns.
3) Time horizon 🕓: Do you require the money in 1, 5, 10 or even 20 years? A shorter time horizon would mean a lower risk appetite, so holding a higher number of stocks would be apt. How many you hold would mostly still depend on your answer to point 1.
4) Investment goals: Do you want to get higher than market returns? Or is an average market return enough? Perhaps you are looking for monthly income? A goal of wanting to beat the market would be more suited to holding very few stocks while a more bogglehead-esque approach would possibly have 1-2 stocks in each sector in their portfolio.
Income or dividend investors would possibly want to hold stocks according to their dividend payout schedule to get income at a frequency they desire. [Grin]
Closing words:
Despite what is said, money isn't everything in life. If you willing to accept average market returns in exchange for peace of mind, there is no harm in investing in broad-market ETFs such as $Vanguard S&P 500 ETF(VOO)$ , $Vanguard Total Stock Market ETF(VTI)$ . In addition to using an ETF as a core part of your portfolio, you can adopt a core-satellite approach by holding an ETF core and a few stocks as satellites. This allows you to have a good mix of risk and reward.
With that said, these are the criteria I would consider to decide on a number of stocks to hold. Remember to do your due diligence and happy investing! [Happy] (this post is not investment advice, just my opinion)
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
