What is the perfect stock portfolio?
Commonly cited rules of thumb suggest subtracting your age from 100 or 110 to determine what portion of your portfolio should be dedicated to stock investments. For example, if you're 30, these rules suggest 70% to 80% of your portfolio allocated to stocks, leaving 20% to 30% of your portfolio for bond investments.
The more equities you hold in your portfolio, the lower your unsystematic risk exposure. A portfolio of 10 or more stocks, particularly those across various sectors or industries, is much less risky than a portfolio of only two stocks.
The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age. So if you're 40, you should hold 60% of your portfolio in stocks. Since life expectancy is growing, changing that rule to 110 minus your age or 120 minus your age may be more appropriate.
Typically, balanced portfolios are divided between stocks and bonds, either equally or with a slight tilt, such as 60% in stocks and 40% in bonds. Balanced portfolios may also maintain a small cash or money market component for liquidity purposes.
Stock | Sector | Trailing 12-month dividend yield* |
---|---|---|
Abbott Laboratories (ABT) | Health care | 1.9% |
Stanley Black & Decker Inc. (SWK) | Industrials | 3.5% |
Atmos Energy Corp. (ATO) | Utilities | 2.7% |
T. Rowe Price Group Inc. (TROW) | Financials | 4.3% |
Reinvest Your Payments
The truth is that most investors won't have the money to generate $1,000 per month in dividends; not at first, anyway. Even if you find a market-beating series of investments that average 3% annual yield, you would still need $400,000 in up-front capital to hit your targets. And that's okay.
40 individual stocks is far too many for a small investor based on Buffett's quotes and teachings. What he does recommend for an investor instead of owning 40 stocks is to just buy an S&P 500 index fund and hold it for the long term.
Investors in their 20s, 30s and 40s all maintain about a 41% allocation of U.S. stocks and 9% allocation of international stocks in their financial portfolios. Investors in their 50s and 60s keep between 35% and 39% of their portfolio assets in U.S. stocks and about 8% in international stocks.
Many financial advisors recommend a 60/40 asset allocation between stocks and fixed income to take advantage of growth while keeping up your defenses.
“It is generally recommended to have a portfolio size of at least $100,000 before considering investing in individual securities, and at least $500,000 before moving away from investment products and investing directly in stocks and bonds.”
What is a 70 30 investment strategy?
What Is a 70/30 Portfolio? A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds.
Having a mixture of equities (stocks), fixed income investments (bonds), cash and cash equivalents, and real assets including property can help you maintain a well-balanced portfolio. Generally, it's wise to include at least two different asset classes if you want a diversified portfolio.
A portfolio that includes a variety of securities so that the weight of any security is small. The risk of a well-diversified portfolio closely approximates the systematic risk of the overall market, and the unsystematic risk of each security has been diversified out of the portfolio.
Stock | 2024 return through March 31 |
---|---|
Janux Therapeutics Inc. (JANX) | 250.9% |
Trump Media & Technology Group Corp. (DJT) | 254.1% |
Super Micro Computer Inc. (SMCI) | 255.3% |
Viking Therapeutics Inc. (VKTX) | 340.6% |
The research by three U.S. finance professors led by University of Arizona professor Scott Cederberg comes to the surprising conclusion that a portfolio holding 100% stocks and no bonds is best, even for people already in retirement.
Company (Ticker) | Forward P/E Ratio |
---|---|
The Kraft Heinz Company (KHC) | 12.2 |
The Progressive Corporation (PGR) | 23.3 |
Spotify Technology S.A. (SPOT) | 98.0 |
Tapestry, Inc. (TPR) | 8.7 |
Discount Rate | Present Value | Future Value |
---|---|---|
6% | $1,000 | $3,207.14 |
7% | $1,000 | $3,869.68 |
8% | $1,000 | $4,660.96 |
9% | $1,000 | $5,604.41 |
According to our calculations, a $1000 investment made in February 2014 would be worth $5,971.20, or a gain of 497.12%, as of February 5, 2024, and this return excludes dividends but includes price increases. Compare this to the S&P 500's rally of 178.17% and gold's return of 55.50% over the same time frame.
Rate of return | 10 years | 30 years |
---|---|---|
4% | $72,000 | $336,500 |
6% | $79,000 | $474,300 |
8% | $86,900 | $679,700 |
10% | $95,600 | $987,000 |
One rule of thumb is to own between 20 to 30 stocks, but this number can change depending on how diverse you want your portfolio to be, and how much time you have to manage your investments. It may be easier to manage fewer stocks, but having more stocks can diversify and potentially protect your portfolio from risk.
Is it OK to buy 10 shares of stock?
Most experts tell beginners that if you're going to invest in individual stocks, you should ultimately try to have at least 10 to 15 different stocks in your portfolio to properly diversify your holdings.
Among the 45 stocks Berkshire Hathaway holds, the top 10 represent about 87% of the company's holdings. Here's a rundown of Buffett's 10 largest holdings based on Berkshire Hathaway's most recent 13F filing, filed Feb. 14, 2024.
The 120-age investment rule states that a healthy investing approach means subtracting your age from 120 and using the result as the percentage of your investment dollars in stocks and other equity investments.
Key Takeaways:
The 100-minus-your-age long-term savings rule is designed to guard against investment risk in retirement. If you're 60, you should only have 40% of your retirement portfolio in stocks, with the rest in bonds, money market accounts and cash.
This principle recommends investing the result of subtracting your age from 100 in equities, with the remaining portion allocated to debt instruments. For example, a 35-year-old would allocate 65 per cent to equities and 35 per cent to debt based on this rule.
References
- https://www.mypivots.com/dictionary/definition/25/80-rule
- https://the5ers.com/risk-management-in-trading/
- https://www.dukascopy.com/swiss/english/marketwatch/articles/top-10-most-successful-forex-traders-in-the-world/
- https://blueberrymarkets.com/market-analysis/news/what-is-5-3-1-trading-strategy/
- https://en.wikipedia.org/wiki/Fibonacci_numbers_in_popular_culture
- https://www.quantifiedstrategies.com/123-pattern-reversal-strategy/
- https://money.usnews.com/money/retirement/articles/should-retirees-follow-the-100-minus-your-age-rule-for-stock-allocation
- https://www.forextraders.com/forex-education/forex-scalping/using-fibonacci-levels-for-scalping-forex/
- https://howtotrade.com/blog/fibonacci-golden-zone/
- https://www.finra.org/investors/investing/investment-products/stocks/day-trading
- https://www.ocmboces.org/tfiles/folder3177/%283%29%20Writing%20Strategy%20-%204-2-1%20Free%20Write.docx
- https://www.invisionapp.com/inside-design/golden-ratio-designers/
- https://centerpointsecurities.com/understanding-the-pattern-day-trading-rule/
- https://www.aaii.com/stocks/screens/66
- https://www.kotaksecurities.com/articles/heres-how-to-use-golden-ratio-and-fibonacci-sequence-in-trading/
- https://www.nasdaq.com/glossary/t/t3
- https://finance.yahoo.com/news/invested-1000-p-global-decade-133005715.html
- https://www.quora.com/What-are-the-disadvantages-of-using-Fibonacci-levels-in-trading
- https://www.britannica.com/money/portfolio-asset-allocation-60-40
- https://www.usatoday.com/money/blueprint/investing/warren-buffett-berkshire-hathaway-portfolio/
- https://www.timothysykes.com/blog/how-to-day-trade-without-25k/
- https://corporatefinanceinstitute.com/resources/career-map/sell-side/capital-markets/fibonacci-retracements/
- https://www.poems.com.sg/glossary/trading-terms/trade-sizing/
- https://www.smithsonianmag.com/science-nature/fibonacci-sequence-stock-market-180974487/
- https://www.fidelity.com/learning-center/personal-finance/wash-sales-rules-tax
- https://www.elegantthemes.com/blog/design/the-golden-ratio-the-ultimate-guide-to-understanding-and-using-it
- https://www.investopedia.com/terms/b/balancedinvestmentstrategy.asp
- https://mathshistory.st-andrews.ac.uk/HistTopics/Golden_ratio/
- https://www.nasdaq.com/glossary/w/well-diversified-portfolio
- https://www.vectorvest.com/blog/market-timing/can-you-buy-and-sell-stock-on-the-same-day/
- https://www.byjusfutureschool.com/blog/real-world-examples-of-the-golden-ratio-in-everyday-life/
- https://www.ig.com/us/trading-strategies/10-of-the-best-chart-indicators-for-trading-231207
- https://www.best-trading-platforms.com/trading-platform-futures-forex-cfd-stocks/1-2-3-4-chart-pattern
- https://www.investopedia.com/articles/active-trading/091114/strategies-trading-fibonacci-retracements.asp
- https://www.forex.com/en/learn-trading/5-3-1-trading-strategy/
- https://www.globalatlantic.com/professionals/thriving-practice/market-insights/rule-120
- https://www.investopedia.com/articles/active-trading/053115/average-rate-return-day-traders.asp
- https://www.investopedia.com/terms/f/fibonacciretracement.asp
- https://www.investopedia.com/terms/f/fibonaccilines.asp
- https://www.investopedia.com/terms/o/openingprice.asp
- https://www.livemint.com/money/personal-finance/what-is-the-100-age-rule-of-asset-allocation-mintgenie-explains-11704719222344.html
- https://m.economictimes.com/news/international/world-news/science-says-this-is-the-most-beautiful-woman-in-the-world/the-golden-ratio/slideshow/71630394.cms
- https://www.motilaloswal.com/blog-details/what-we-need-to-know-about-dealing-in-trade-2-trade-stocks/1796
- https://tlc.thinkorswim.com/center/reference/Drawings/Fibonacci/Fibonacci-Spiral
- https://fastercapital.com/content/Scalping-vs--Day-trading--Which-Strategy-is-Right-for-You.html
- https://www.forbes.com/advisor/investing/best-stocks-to-buy-now/
- https://www.accelare.com/blog/the-three-types-of-strategy
- https://www.fool.com/investing/how-to-invest/stocks/how-many-shares-buy-stock/
- https://www.investopedia.com/articles/active-trading/012815/top-technical-indicators-scalping-trading-strategy.asp
- https://www.investopedia.com/articles/forex/07/forex_leverage.asp
- https://poe.com/poeknowledge/1512928000358234
- https://smartasset.com/retirement/what-is-the-120-age-investment-rule
- https://fr.tradingview.com/scripts/1minute/?script_access=all
- https://www.fxstreet.com/education/golden-rules-of-trading-202312051327
- https://www.achieveit.com/resources/blog/reframing-your-framework-4a-planning-model/
- https://tickertape.tdameritrade.com/trading/avoid-violating-pattern-day-trader-rule-18005
- https://www.ig.com/en/trading-strategies/what-are-the-best-timeframes-in-forex-trading--210805
- https://www.shutterstock.com/blog/what-is-the-golden-ratio
- https://www.linkedin.com/pulse/what-90-rule-forex-broker-forex-global-czp0c
- https://www.quora.com/Which-form-of-trading-is-the-most-risky
- https://www.cmcmarkets.com/en/trading-guides/how-to-trade-with-fibonacci
- https://www.capitaltopics.com/blogue/is-100-stocks-really-the-best-option-for-your-portfolio
- https://www.linkedin.com/pulse/why-25000-minimum-day-trading-forex-trading-for-beginners2-dfjac
- https://www.shareindia.com/knowledge-center/intraday-trading/intraday-trading-indicators
- https://www.investopedia.com/articles/forex/11/fibonacci-rules.asp
- https://tradethatswing.com/the-1-risk-rule-for-day-trading-and-swing-trading/
- https://www.investopedia.com/terms/f/fiftypercentprinciple.asp
- https://www.mypivots.com/article/details/30/the-80-rule
- https://www.linkedin.com/pulse/three-strategic-planning-questions-everyone-should-ask-eric-douglas
- https://forextraininggroup.com/trading-the-1-2-3-reversal-pattern-setup/
- https://zerodha.com/varsity/chapter/the-golden-mean-real-trading-phenomenon-or-just-wishful-thinking/
- https://www.tipranks.com/news/personal-finance/what-does-the-t2-rule-mean-in-stock-settlement
- https://blueberrymarkets.com/learn/advanced/fibonacci-retracement-forex/
- https://forextradingstrategies4u.com/123-forex-trading-strategy/
- https://www.sofi.com/learn/content/how-many-stocks-should-i-own/
- https://www.investopedia.com/terms/t/two-percent-rule.asp
- https://www.investopedia.com/ask/answers/selling-bear-market-does-your-broker-buy-your-shares/
- https://www.investopedia.com/financial-edge/0910/the-two-hour-a-day-trading-plan.aspx
- https://www.linkedin.com/pulse/warren-buffett-how-many-stocks-should-you-own-habeeb-mahmood
- https://www.quora.com/What-is-the-3-rule-in-stock-trading
- https://www.mathnasium.com/blog/14-interesting-examples-of-the-golden-ratio-in-nature
- https://www.kotaksecurities.com/intraday-trading/which-time-frame-is-best-for-intraday-trading/
- https://www.tradebulls.in/trading-account-basics/10-best-rules-successful-trading
- https://www.investopedia.com/articles/investing/062714/100-minus-your-age-outdated.asp
- https://www.investopedia.com/articles/trading/06/fibonacci.asp
- https://www.ceenta.com/news-blog/what-makes-objects-pleasing-to-the-eye
- https://www.forbes.com/sites/chriscarosa/2023/01/14/at-this-size-your-retirement-portfolio-is-too-big-for-mutual-funds/
- https://www.wikihow.com/Win-at-Connect-4
- https://www.motilaloswal.com/blog-details/how-often-can-you-buy-and-sell-the-same-stock/20217
- https://www.nerdwallet.com/article/investing/how-to-day-trade-safely
- https://tradewiththepros.com/what-should-you-not-do-in-day-trading/
- https://in.investing.com/tools/fibonacci-calculator
- https://www.investopedia.com/day-trading/best-time-day-week-month-trade-stocks/
- https://www.timothysykes.com/blog/1-minute-scalping-strategy/
- https://www.investopedia.com/articles/trading/06/daytradingretail.asp
- https://www.definedgesecurities.com/library/123-pullback-bullish/
- https://money.usnews.com/investing/articles/best-performing-stocks-of-the-year
- https://www.investopedia.com/ask/answers/122414/how-do-i-use-fibonacci-retracements-create-forex-trading-strategy.asp
- https://fbs.com/analytics/guidebooks/how-to-determine-position-size-28
- https://www.liberatedstocktrader.com/how-to-use-fibonacci-retracement/
- https://www.quora.com/What-is-the-difference-between-the-golden-ratio-and-the-Fibonacci-sequence
- https://ruleof40.trade/
- https://money.usnews.com/investing/articles/best-long-term-stocks-to-buy
- https://www.investopedia.com/top-7-technical-analysis-tools-4773275
- https://www.investopedia.com/terms/f/fibonaccichannel.asp
- https://tradeciety.com/how-to-use-fibonaccis-in-your-trading-effectively
- https://tradingfibonacci.com/index.php/fibonacci-indicator/technical-analysis
- https://finance.yahoo.com/news/using-golden-ratio-finance-203347113.html
- https://www.babypips.com/learn/forex/fibonacci-retracement
- https://www.investopedia.com/ask/answers/05/optimalportfoliosize.asp
- https://tools.carboncollective.co/future-value/1000-in-20-years/
- https://www.sciencefocus.com/science/what-is-the-fibonacci-sequence
- https://www.investopedia.com/articles/personal-finance/121815/buffetts-9010-asset-allocation-sound.asp
- https://www.finowings.com/technical-analysis/technical-analysis-terms/top-5-technical-indicators-for-novice-traders/
- https://fi.money/blog/posts/the-80-20-rule-what-is-it-how-it-works
- https://www.propelx.com/blog/out-with-70-30-and-in-with-60-30-10/
- https://poe.com/poeknowledge/1512928000274648
- https://www.empower.com/the-currency/money/average-portfolio-mix-by-investor-age
- https://letstalkscience.ca/educational-resources/backgrounders/fibonacci-and-golden-ratio
- https://www.usbank.com/investing/financial-perspectives/investing-insights/what-is-a-diversified-portfolio.html
- https://finance.yahoo.com/news/genius-ways-1-000-month-105500970.html
- https://www.quora.com/Why-is-the-Golden-ratio-called-so
- https://www.oprah.com/oprahshow/measuring-facial-perfection-using-the-golden-ratio
- https://www.investopedia.com/terms/f/five-percent-rule.asp
- https://www.angelone.in/knowledge-center/online-share-trading/scalping-indicator
- https://www.waca.associates/en/web-analytics-dictionary/3cs-model/
- https://www.investopedia.com/articles/technical/04/033104.asp
- https://www.ally.com/stories/invest/day-trading-rules-and-leverage/
- https://www.fool.com/the-ascent/buying-stocks/articles/heres-what-happens-when-you-invest-500-a-month/
- https://www.investopedia.com/ask/answers/05/fibonacciretracement.asp