If the title isn’t clear, what would be an ideal number of holdings of shares we can keep in Bhutan?

When I see my portfolio, this question comes up. I wonder if I am holding too many or too few number of shares.

Right now, I have 11 holdings – 5 in manufacturing, 3 in banking, and 3 in insurance. None in distribution, trading and publishing.

Once I had 14 holdings – almost all the tickers of Bhutan stock market. I brought down to 11.

I mentioned few times that I probably hold too many stocks, and then my aim of keeping below 10.

But am I doing this just for the sake of having fewer stocks? Will I benefit from it? Is there an ideal number?

What is Diversification in Bhutan?

When we review number of holdings in our portfolio, we do from the lens of diversification – possible risk and reward.

Risk and diversification are inversely related. If we diversify too much, we are taking too less risk and vice-versa.

If we hold too many, gain in one or two tickers will be like a peanut. But in other hand, loss in one or two will take away our sleep if we have too few holdings.

It should be at a number where we don’t feel guilty of forgoing a potential upside but also not get scared by little price swings.

However, this ideal number shall be different for different person. To start we can see from the angle of diversification and its reward.

How to Diversify Your Investment?

Bhutan stock market is small. We have only 18 counters spread across 7 investing sectors.

All these companies also have different market capitalization. A big and matured company like BNBL will have higher market’s values with lower possible risk and reward.

Small companies like SVL will have small market’s capitalization values with higher possible risk and reward.

This means, we can diversify our portfolio based on sectors and market capitalizations of those companies.

I have written this in detail while writing on how to build a stock portfolio that tracks the Bhutan Stock Index.

Is Diversification Recommended?

Stock trading and investing experts recommend keeping 5% of portfolio in a single stock.

It means we must have 20 holdings in our portfolio which as we know is just impossible in Bhutan.

If we follow that rationale, we can tweak to suit our Bhutan stock market. 10 number of shares is good. Every ticker will be 10% of the portfolio.

We diversify to protect our portfolio from going to zero. A stock market is unpredictable and no one is always right in it.

Conclusion: Look at CD’s Portfolio

In that sense, I also have 11 holdings in my portfolio. If we go by a capital invested, the breakups are as shown below:

However, you have realized I don’t hold in other sectors. I over-invested in some sectors and under-invested in others.

I have to review my portfolio and then re-balance not only among sectors but also among counters though I am comfortable with it.

The point is if you lose sleep due to price changes in one/two tickers, it’s time you increase the number of holdings.

In the end we do not invest to get nightmares but to secure our future by letting our money grow but not at the cost of our mental peace.

What is the number of shares you hold? Are you planning to increase or decrease it? 

SUBSCRIBE AND BE A CHEERFUL DONKEY

All my income, savings and investing reports in your Email inbox for FREE

SUBSCRIBE!

You have successful joined Cheerful Donkey Community!