5%+ Dividend Yield Portfolio: The Number Of Stocks To Own (Apr 2019 Review)

Musings
More than any single topic, I get a LOT of comments on my articles about ideal portfolio size (the age old ‘concentration vs. diversification’ debate). This is especially true of my extensive ETF holdings (about 50% of my total assets) where I own small pieces of many hundreds of companies. I suppose I’ve always tended to error towards over-diversification since I’ve internalized the ‘wisdom’ that I was taught as an undergraduate finance major about how diversification is the greatest thing since sliced bread. However, my professors also told me the market was efficient and never wrong, so I’ll delve open-minded into this subject that deserves deeper attention.
Concentration
“Investors have been so oversold on diversification that fear of having too many eggs in one basket has caused them to put far too little into companies they thoroughly know and far too much in others which they know nothing about.” -Phil Fisher, 1958
The case for a more concentrated portfolio has many nuances, but essentially comes down to this ‘if you have confidence in your picks, then increasing your number of holdings means you are adding weaker ideas that will dilute the returns from your winners.’ This is well summarized by a recent article by Sean Stannard-Stockton. You should read the article, but here is my main takeaway:

Source: Burton Malkiel via Sean Stannard-Stockton
“This chart is based on a study discussed in the book "A Random Walk... Read more