How many shares do you prefer to include into your portfolio?

Discussion in 'Trading' started by KiboR, Dec 3, 2018.

  1. KiboR

    KiboR

    How many shares do you prefer to include into your portfolio for the best diversification?

    What are your Yearly Yield expectations of it?
     
  2. ET180

    ET180

    Sounds like the wrong question to ask. You can have a portfolio 100% in SPY and be more diversified than owning 15 different stocks in the same sector.
     
    KiboR likes this.
  3. KiboR

    KiboR

    Ok, and what about yearly yield expectations? Can you construct a diversified portfolio consisting from different stocks, which will be much better than SPY by Yearly Yield or is it too difficult task and nobody can solve it?
     
  4. ET180

    ET180

    What do you mean by yearly yield expectations?
     
  5. KiboR

    KiboR

    I mean average yearly yield (profit) on SPY for the last 5 years and extrapolate it for the next year.
     
  6. maxinger

    maxinger

    Zero.
    I don't invest in shares .
    I just day trade.
     
  7. KiboR

    KiboR

    The Microsoft's yearly yield is about +30% today. Do you have much better?)
     
  8. tomorton

    tomorton

    I used to own and trade shares but found betting on the index values themselves was much more reliable through lower volatility. I also found I disbelieve the diversity myth as told by salesmen.

    The object of a diverse portfolio is to smooth out the variations in asset price performance over the holding period. This is justifiable when the majority of assets in this class are rising, in order that the risers more than outweigh the losers plus the flatliners. So you could say you should invest in all the member shares in the index but in practice that means a representative sample, or even an optimised sample.

    But what about in periods of bear market conditions? Its impossible to say that your representative or optimised sample will be less damaged than the rest of the index. They might fall only as badly but they might fall worse, and there isn't a way of knowing. The risk is actually skewed to the downside because most private retail share traders buy in bull conditions, with no TA visibility of how the same share performs under bear conditions (even if these were standard). Add to which, if you have to sell holdings in 10 stocks in a crisis, the costs incurred will be greater than simply closing a long on the index value.

    So your efforts to reduce the risk of lower profit might well have led to an increased risk of greater loss and you will be unaware until after it has happened.
     
    KiboR likes this.
  9. KiboR

    KiboR

    Right you are! And what about derivatives on SPY (Futures or Put-options) at the most stressful market's points? Do you have a positive experience of using it?
     
  10. tomorton

    tomorton


    I'm in the UK so its easy for me, I can spreadbet the index values of the S&P, the Dow, FTSE100, DAX etc. etc. These are derivatives though I recognise not available in every jurisdiction. But there are alternatives like ETF's which will do the same thing: the more complicated derivatives like traded options and CFD's are likely to be harder to use profitably and have more expensive costs. But the most strategic advantage of derivatives is profitable exposure to falling markets.
     
    #10     Dec 4, 2018
    KiboR likes this.