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How many portfolio holdings should you have?

Avoid the risks of too much or too little diversification
How many portfolio holdings should you have?

Adding new holdings to your portfolio can be deceptively easy. If you think you have identified a compelling story, from a seemingly oversold stock to a promising new fund, you can deploy cash into it via an investment platform in a matter of minutes. And while this is undeniably an exciting part of DIY investing, it also comes with serious pitfalls.

The ease with which you can make individual investments on a standalone basis, and sometimes on impulse, can mean that investors end up with far too many holdings.

“This is the most common mistake investors make,” says Rob Morgan, pensions and investments analyst at Charles Stanley. “I have sometimes been guilty of it myself in terms of taking a ‘pick and mix’ or ‘stamp collection’ mentality to building up an unstructured array of holdings.”

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