Is It Possible to Buy Too Many Stocks?
Yes, but buying too many stocks can be challenging to keep track of all of them. It can also dilute the impact of large stock gains and limit your upside.
Published April 20, 2021.
Yes, it is possible to buy too many stocks and over-diversify because some mutual funds have to own many stocks due to their large cash. Neither is it easy to outperform their benchmark or indexes.
Owning more stocks than necessary can dilute the impact of large stock gains and limit your upside. It will also make it difficult for you to keep track of all your holdings, however, be careful, holding too little means that a bad day for one or two stocks could leave you with sleepless nights.
Although all is not lost if you utilize good trading practices despite the portfolio size.
While there's no minimum order limit on how many stocks you can buy of a publicly-traded company, it's recommended to buy blocks of stock with a minimum value of $500 to $1000.
It is also advisable to own 10-30 stocks in your portfolio. Less than 10 stocks are too little diversification, and you have concentrated risk on just a few positions. Also, more than 30 stocks are almost too diversified and too much for an average investor.
That said, always ensure you study your stocks and do your due diligence before you invest.
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