The Fewer the Stocks, the Better

April 2005
Journal of Financial Planning;Apr2005, Vol. 18 Issue 4, p18
Academic Journal
The article reports that investors in individual stocks, particularly wealthier investors, has done better concentrating only on one or two stocks instead of diversifying into three or more stocks, according to researchers at the University of Michigan and the University of Illinois. The found that wealth investors with concentrated stock portfolios are significantly better stock pickers than their more diversified counterparts. Investors with portfolios of $100,000 or more outperformed their more diversified counterparts by four percent. The study also found that investors did better when sticking to local stocks or avoiding stocks in the Standard & Poor's 500. The main reason for the success of the concentrated portfolios is that the investors are able to exploit their knowledge about the stocks in which they invested, concluded the researchers, who analyzed over one million stock trades from 1990 to 1991.


Related Articles

  • Find your investment mantra. Brown, Simon // Finweek;12/19/2013, p36 

    The article presents the author's views on finding one's investment mantra. He states that his investment mantra is to purchase stocks that cannot be replaced or penetrated when they are affordable and hold them for as long as one can. He comments that an investment mantra will be influenced by...

  • New Year's heave. Haselhurst, David // Bulletin with Newsweek;1/17/2006, Vol. 124 Issue 6503, p56 

    The article presents the author's views on the performance of portfolios. Last weeks of 2005 were spurred by buoyant oil, gold and commodity prices and expectations that the boom will continue into 2006. The portfolio gained 82.3% during calendar 2005, up from an opening portfolio of $30,000 in...

  • Kicking the Tires to Get Results.  // Financial Planning;May2004, Vol. 34 Issue 5, p24 

    Analyzes the investment structure of FPA Crescent Fund. Percentage of asset class guidelines in stocks; Earnings expectations of fund manager Steve Romick for a period of 3 years; Equity investment of the company.

  • WEALTH MANAGEMENT: Multiple choice.  // Corporate Adviser;Jul2010, p34 

    The article focuses on the management of multi-manager funds. It states that a multi-manager fund aims to offer the investor with diversification whether it will access to a range of markets, styles, and different stock selection or provide market neutrality. It mentions that multi-managers...

  • Ways DIY Investors Can Improve Their Results Part 2. Mackenzie, Warren // Canadian MoneySaver;Mar2015, p14 

    The article offers tips on how do-it-yourself (DIY) investors who purchase individual stocks may improve their results. It suggests to avoid emotional response by not letting their emotions get in the way, not treating different pools of money differently, and not overreacting to unexpected...

  • Why You Should Invest Like Your Significant Other. Drake, Tom // Canadian MoneySaver;Mar2015, p17 

    The article presents the author's views about the application of the differences that attract a person to his or her partner in creating a long-term investing plan. It highlights a study at the University of California, Davis which reveals that single women have better investing results than...

  • Keeping your share portfolio in balance. BROWN, SIMON // Finweek;6/26/2014, p43 

    The author offers ideas for investors on how to put balance in their investments. He suggests tips on how to use a simpler approach in balancing portfolio by selling and using new cash to boost the other stocks. The author also mentions exceptions of the approach, however, he argues that it will...

  • AN ALL-STAR FUND OF FUNDS PORTFOLIO.  // Modern Trader;Feb2016, p13 

    The article states that combining 13F manager strategies with a fund of funds approach helps investors in the U.S. to avoid the risks of investing with a single manager. It suggests that one may decide to own the top five or 10 stocks owned by each manager thus creating a diversified portfolio...

  • PORTFOLIO ANALYSIS WITH PARTIAL INFORMATION: THE CASE OF GROUPED DATA. Elton, Edwin J.; Gruber, Martin J. // Management Science;Oct87, Vol. 33 Issue 10, p1238 

    Almost all of the literature in finance analyzing the selection of optimum portfolios assumes that the agent making the decision has a full set of estimates of the expected return for each security and the variance covariance matrix between securities. In actual practice most decision makers...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics