In the Search for Optimal Numbers of Stocks in your Portfolio Part 2

Following Monday’s article here are the answers from 6 other generous participants:

 

Dividend Life

#1 What is the size of your portfolio, Dividend Life?

Size as in value? I hold both individual stocks and mutual funds. The individual stock portion is $35,376 as of end of June and my portfolio total is $202,994.

#2 How many different company shares do you own?

I own stocks in 45 different companies today. Some of the stocks are from spinoffs; not every company I hold is of my own choice.

#3 How many new company shares do you expect to buy in 2015?

I’ve added seven new companies so far this year including… ; I’m probably going to consolidate existing positions starting next month for the remainder of the year but I have no fixed rule so things may change.

#4 What is your target or maximum different company shares owned?

My upper limit is 60; no more than 6 companies in each of the 10 market segments, with 1 company in each segment being a non-US stock ideally.

From the research I’ve done 50-60 stocks seems to be an optimum number in terms of risk-mitigation; with diminishing returns in mitigating risk above 60.

#5 How do you manage your asset allocation? (do you have a goal in % for each sector, size of each holding compared to your overall portfolio, do you rebalance your portfolio?)

I only ‘rebalance’ via directing new purchases, not by selling. I won’t add to a position if the shares are worth more than 7.5% of my total stock portfolio by value. I also won’t add to a position if the annual dividend income from that stock is > 5% of my total stock dividend income. Four companies exceed my 5% dividend income rule currently; the highest being AT&T at 10.5%. Both of these rules are about enforcing diversification to limit the impact of one company cutting dividends.

Asset allocation is based on annualized dividend income per sector and not by market cap. I have a target allocation for dividend income from each sector that’s weighted towards sectors having higher numbers of dividend champions. I’ve described my current target allocation here.

#6 How do you keep up with all your existing holdings (do you read their financial statement, only headlines during earnings seasons, special reports, etc?)

I typically buy and hold large blue-chip companies, so I don’t worry too much about their short-term financial performance as I plan on holding for the long-term. I do track their dividend yield regularly in case it drops too low (*) and I pay more attention to a company if they don’t announce a dividend increase per their usual schedule. Otherwise I just browse headlines from the companies once a week or so.

(*) Having said that, I’ve yet to sell a position because its dividend has fallen lower than my minimum target yield but it’s something I consider from time to time.

 

Retire by 40

#1 What is the size of your portfolio, Retire by 40?

My dividend portfolio is worth about $300,000.

#2 How many different company shares do you own?

32 companies

#3 How many new company shares do you expect to buy in 2015?

2 or 3.

#4 What is your target or maximum different company shares owned?

25

#5 How do you manage your asset allocation? (do you have a goal in % for each sector, size of each holding compared to your overall portfolio, do you rebalance your portfolio?)

Here is the overall target asset allocation of my investment. This includes our retirement portfolio which is mostly invested in low cost index funds.

• 45-50% US
• 10-15% International
• 8% emerging
• 20% bond
• 2% cash/money market
• 10% alternative – REIT

I don’t rebalance much. I usually just add new investment in the asset class that is low. I probably would rebalance if we have a big 30% stock market crash.

I don’t look at the sector too much. Currently, I’m low on material, communication, and utilities. As long as tech and finance don’t outsize everything else, I’m pretty happy with that.

Long term, I would like to reduce the number of stocks I own. I can’t follow 30 stocks.

#6 How do you keep up with all your existing holdings (do you read their financial statement, only headlines during earnings seasons, special reports, etc?)

I just read the news and the financial statements once in a while. Most of the companies in my dividend portfolio are pretty solid so I’m not worried about short term fluctuations. I’m keeping a closer eye on several that I’m worried about – Mattel, Ford, and Umpqua Bank.

 

Income Surfer

#1 What is the size of Income Surfer portfolio?

Currently 21 stocks and ETFs

#2 How many different company shares do you own?

Currently 19 individual stocks and 2 ETFs

#3 How many new company shares do you expect to buy in 2015?

It depends on valuations. Probably 4 or 5 new companies.

#4 What is your target or maximum different company shares owned?

15 to 20 is my target

#5 How do you manage your asset allocation? (do you have a goal in % for each sector, size of each holding compared to your overall portfolio, do you rebalance your portfolio?)

I don’t have any hard and fast rules for asset allocation.

#6 How do you keep up with all your existing holdings (do you read their financial statement, only headlines during earnings seasons, special reports, etc?)

I follow them as best i can, but I definitely re-evaluate each holding every 6 months.

 

My Own Advisor

#1 What is the size of the portfolio at My Own Advisor?

 Our dividend stock portfolio is now into the six figures. I believe we’ll need invested assets of just over $1 million to retire on.

#2 How many different company shares do you own?

 Our dividend stock portfolio holds mostly Canadian dividend paying stocks. The big banks, insurance companies, telecommunication companies and the largest energy and utility companies in Canada form the majority of the portfolio. We own a handful of Real Estate Investment Trusts (REITs) as well.   I guess in total we own about 30 Canadian companies.

#3 How many new company shares do you expect to buy in 2015?

 Not many since most of our dividend stock portfolio is set-up to reinvest all dividends paid for more shares every month and quarter. I think about 20 of our Canadian stocks are set-up for dividend reinvestment plans (DRIPs). We tend to save the cash leftover (after dividends are reinvested) and use that money for more stock purchases throughout the year. I have my eye on Suncor right now. If not buying individual stocks we invest in a couple of low-cost, broad market Exchange Traded Funds (ETFs) for extra diversification when Mr. Market has a bad day, week or month. I tend to celebrate falling prices.

#4 What is your target or maximum different company shares owned?

I really have no set target although I try to keep my sector allocation in line with the TSX Composite Index. Take the ETF XIC as an example of that – it has a breakdown of roughly 35% financials (think banks and life insurance companies), 20% energy (think Enbridge, Suncor, Canadian Natural Resources and more), 12% materials (think mostly mining companies) and a lesser amount of industrials and telecommunications companies.

I guess if I had to pick the maximum number of companies I would ever own it would be about 50. That would be plenty.

#5 How do you manage your asset allocation? (do you have a goal in % for each sector, size of each holding compared to your overall portfolio, do you rebalance your portfolio?)

I think I explained this a bit above. I try to keep my sector allocation in line with the TSX Composite Index and in doing so, I’m basically creating my own large, medium and small-cap dividend stock ETF if you will. I rebalance a few times per year by buying a trailing / lagging stock in a sector that is out of favour. This means the oil and gas sector is attractive to me now.

I don’t worry about rebalancing my U.S. assets very much since a good portion of our U.S. assets are in low-cost ETFs. I just buy more U.S. stocks and ETFs when our Canadian dollar is high (certainly higher than now).

I try to keep any one stock at less than 5% of my overall portfolio value.

#6 How do you keep up with all your existing holdings (do you read their financial statement, only headlines during earnings seasons, special reports, etc?)

I actually don’t keep up with the news of my existing holdings very much. I figure if I have to read news about a company all the time this is not something worth investing in – it’s simply too much work. Besides, I have more important things to do with my time than read financial statements, annual reports and business news all day – although I do find this stuff interesting. My plan is to buy and hold and hold stocks in my portfolio for decades on end so any day-to-day or even quarter-to-quarter company news that adds to market volatility is mostly irrelevant to me.

 

Roadmap 2 Retire

#1 What is the portfolio size at Roadmap 2 Retire?

I do not share this data on the blog.

#2 How many different company shares do you own?

I currently own 28 individual companies and 5 funds.

#3 How many new company shares do you expect to buy in 2015?

I expect to add 1 or 2 more new companies for the rest of 2015.

#4 What is your target or maximum different company shares owned?

My target maximum is 5% of entire portfolio.

#5 How do you manage your asset allocation? (do you have a goal in % for each sector, size of each holding compared to your overall portfolio, do you rebalance your portfolio?)

I do not have a particular goal per se for each sector, but I try to keep it balanced as much as possible. I buy companies which provide good value at the time. I do not rebalance in the traditional sense, in other words – I do not sell shares in companies simply because there has been a runup in prices. My holding period is forever, unless something fundamental in the company changes.

#6 How do you keep up with all your existing holdings (do you read their financial statement, only headlines during earnings seasons, special reports, etc?)

All of the above 🙂

 

Tawcan

#1 What is the size of your portfolio, Tawcan?

I don’t talk about the size of my dividend portfolio on the blog because I think it’s irrelevant when it comes to dividend growth investing. The more important thing is how much dividend income you’re generating and how safe are these dividends. Right now we’re generating roughly $800 per month, so you can do some calculation on the size of our portfolio based on different yield percentages.

#2 How many different company shares do you own?

Right now we own 56 companies in our dividend portfolio. We do own other stocks outside of our dividend portfolio so that number is a bit more than 56 companies.

#3 How many new company shares do you expect to buy in 2015?

Very hard to say. There are a number of companies that I’m monitoring for potential buys and therefore additions to our portfolio. We’re also looking to add more shares of dividend stocks that we already own so we can enroll in DRIP.

#4 What is your target or maximum different company shares owned?

We do not have a target.

#5 How do you manage your asset allocation? (do you have a goal in % for each sector, size of each holding compared to your overall portfolio, do you rebalance your portfolio?)

We have an ideal asset allocation breakdown for the different sectors but our current portfolio is nowhere close to this ideal asset allocation. Because of this we’re trying to balance our portfolio by adding companies in specific sectors.

#6 How do you keep up with all your existing holdings (do you read their financial statement, only headlines during earnings seasons, special reports, etc?)

We typically follow companies in our portfolio through Seeking Alpha notifications and check on the earnings here and there. Because we are investing for the long term, we try to ignore the day-to-day news.

 

What about you?

I’m curious to hear you; what is your magic number? Do you think 50+ is too much to follow or do you think it’s a minimum to ensure a strong diversification?

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