Heyyy Fellow Value Pickers!
Just wanted to talk about this that we should always allocate only a certain portion of our portfolio(5-8% as I was advised) into a single stock.
So is this actually a thumb rule or can the numbers be changed?
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There are no thumb rules as such in investing, in the sense that, investing is not pure mathematics. A lot of other factors decide the outcome including an investor’s psychology.
A lot of people invest 1-2% for tracking purposes, and increase their allocation as the conviction grows. But the allocation should not go overboard, say 30%, as no matter how convinced we are, there will be some unknowns in the company if we don’t have access to what really is happening in the company, hence the necessary diversification.
As far as the tracking of companies go, one has to know how many companies he can follow, core PF, satellite PF, stocks that need not be monitored every quarter, even every year etc, and one’s own circle of competence, domain knowledge etc.
Age of the investor, the return expectation, the affordability of loss, the current financial state, goals if any, also play a role in an investor’s journey.
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Thanks for your valuable response and sharing the core and satellite concepts. This will surely help me grow my PF.