What is the minimum size (percentage) holding that is worthwhile?

[rayvt]

Consider a significant but not huge portfolio, say $500,000 to $2 million, with a number of stock & ETf holdings.
What is the minimum size (percentage) holding that is worthwhile?

For example, is it worthwhile to have or keep a stock that is only 1% of the portfolio? Even if it doubles it is not going to have much effect on the portfolio.
How about less than 1%?

In a equal weight 50 stock portfolio, each stock would be 2%. If it has a few overweight holdings like SPY or QQQ, then it is likely to have many that are 1% or less.

 

[jebmke]

I've gotten rid of anything less than 10%. Normally I'd look for 20% weight for an investment. I don't invest in individual securities other than Treasuries anymore. I have a handful of individual stocks still that I am gradually donating to our DAF. I hope to get rid of them by 2025 EOY.

 

[target2019]

Consider a significant but not huge portfolio, say $500,000 to $2 million, with a number of stock & ETf holdings.
What is the minimum size (percentage) holding that is worthwhile?

For example, is it worthwhile to have or keep a stock that is only 1% of the portfolio? Even if it doubles it is not going to have much effect on the portfolio.
How about less than 1%?

In a equal weight 50 stock portfolio, each stock would be 2%. If it has a few overweight holdings like SPY or QQQ, then it is likely to have many that are 1% or less.

The method used for picking the stock or ETF would be?

Going in, some pick the strike price and a future price you sell at. If something drops from 2% to 1% of portfolio, how does that reconcile with the original plan?

I guess that's the fun of stock picking. You can look deep, or just set a target percentage.

 

[MarieIG]

It depends. If one has a taste for speculative investments (potential "big" winners - but also potential "big" losers, I'm fine with small initial positions.)

 

[Car-Guy]

Depends on where your are in life, and what your plans are IMO... Ten+ years ago, it was a good mix of equities, ETF's, CD's, bonds, even gold/silver... All were greater than 10% of my NW.. Today, (I am in my early 70's) it's 100% fixed income, (or cash) and most of that is in CD's.

 

[target2019]

I would treat $500K and $2M differently.

With a manual system 50 things is plenty for me to look after. In $500K pile that would mean 10K slices. In a 2M playground I'd still want to have 50 thingies. But 40K per slice is too risky for me. I'd use index fund(s) for 50-75% of the 2M, and 50 stocks for the 25%.

 

[DrRoy]

Min 10-20%.

 

[TheWizard]

Some folks have their bulk in index funds and 5% in wild money...

 

[pjigar]

Each of their own but the lowest percent holding in my equity portfolio is 30%. Disclaimer: I don't buy individual stocks except Berkshire. 30% is Berkshire. Rest is broad market equity Index fund.

 

[Stormy Kromer]

This reminds me of a portfolio designed by a FA that has about a dozen different investment classes with weird percentages in each one. For example 2.7% in real estate and 1.2% in commodities......

Intentional complication.

 

[MarieIG]

This reminds me of a portfolio designed by a FA that has about a dozen different investment classes with weird percentages in each one. For example 2.7% in real estate and 1.2% in commodities......

Intentional complication.

Or perhaps - churning.

 

[MarieIG]

Some folks have their bulk in index funds and 5% in wild money...

 

[Gumby]

Even when I was buying individual stocks, I never went above 5% in a single position. Now I'm down to one stock and it is only about 1.5% of my portfolio. The vast majority of the rest is in mutual funds and I have a few treasuries.

 

[Zathras]

Generally 3%-5% is my minimum holding size.
I have twice opened a speculative position at less than that, but that is uncommon.

To me, the size of each holding seems to be a very subjective decision. I don’t think there is any ‘right’ answer.

 

[disneysteve]

If you’re talking individual stocks I’d say not to have more then 5% in one company. If you’re talking about mutual funds or ETFs it doesn’t matter. My daughter’s retirement account is in a single fund. My 401k is in a single fund. As for a lower limit I don’t think there is one. If you don’t mind having it on your spreadsheet to keep track of, what difference does it make?

 

[calmloki]

Gal just sprang for a tiny amount of NVDA - she had wanted to buy it a month ago, but I dragged my feet. Won't make any difference to our general balance sheet unless it goes up by twenty times or more, but $500 swings in a day are fun to watch. Anymore an investment needs to be about 1.5% of our NW for me to stir myself. Unless it's free money, like a thousand or more for moving money from one bank to another. Or picking up a dime on the street - though I pretend bending over to do so is good exercise as well.

 

[5Miler]

I have just one stock holding in my portfolio as all the rest of my holdings are mutual funds. This stock accounts for 0.15% of my holdings yet I will not sell it anytime soon.

It is a cruise line stock I bought at the depths of the market woes last year for about $13 a share. The cruise line provides a $100 credit per stateroom for shareholders with at least 100 shares. I don't care what the stock does although it is up 25% since purchase. DGF and I cruise on this cruise line 3 to 4 times a year so it gives me a great pleasure to spend this money each trip. It's the little things sometimes.

 

[OldShooter]

I don't do individual stocks any more, but have never wanted to clutter up my portfolio with tiny positions of any sort. Why own something that has no potential to materially affect the portfolio? So 5% would be my number.

To answer the unasked maximum position question I go with the prudent man rule that governs professional trustees. Some banks limit at 15%, others at 20%. Note that this is for individual assets like stocks, individual real estate properties, bond issuers, etc. For broadly diversified mutual funds it does not apply. The internal diversification means that there is no overconcentration, even at 100%. (Right now our equity tranche is 95% VTWAX.)

At DW's megabank, the 401K match was in company stock. Prior to age 55 she could not sell any of it even though it was well over 15%. At age 55 and one day, she sold down to what she considered to be a prudent level. I don't remember the number, though.

 

[BeWealthy]

I don't have an answer, but I purchased a tiny position in TSLA at the end of 2022 with some lingering cash in my brokerage account. It doubled, dropped, and is still up about 50%. Fun! I recently calculated the amount invested in TSLA in my QQQ, SPY, SPTM holdings. That dwarfs my individual position. It seems absurd to dabble in small positions for financial reasons, but it seems to scratch some itch.

 

[Al18]

I own a number of stocks, currently about 30 and will continue to do so. I have no minimum % - it serves no purpose. Sometimes I buy well known stocks, sometimes not. On the stocks with little or no track record, I usually invest just $500-$1000 to limit my exposure. 90% of the time I guess right and the stock goes up, sometimes a lot. I bought some ARM at the beginning of 2024 for $70, and today it’s trading for $134.

 

[Texas Proud]

I have bought a lot of preferred shares, baby bonds and even individual bonds for my income (bond) side... and most are less than 1% of my total... I do have individual stocks that are less than 1% but as mentioned do not have a big impact on returns...


One of the problems with this is that some are called or mature and you have to look for another alternative...

 

[copyright1997reloaded]

A 1% purchase of Apple on a 500K portfolio (so $5,000.00) in October 2000 would have resulted in about 277 shares. That would be 277*2*7*4 = 15, 512 shares today worth $2,836,834.56 today AND you would be getting an annual dividend of $14,891.52.

I picked the above date because that is when I bought Apple (a very modest investment, considerably less than 1% of my net worth at the time). No, I didn't keep it all (but it still represents my biggest single stock holding). This is a primary reason why I buy single stocks - so that on those rare occasions I find a winner, I can let it ride w/o watching every second worried about it.

I have no minimum holding size. Sometimes I buy 1 share or 10 shares or 100 shares just to track it.

 

[Venturer]

Our only 2 idividual stocks that we own is AZO & AAPL I bought AZO thru payroll deductions starting a $16.50 a share and continued buying for the 25 years I w***** for them. My DD had married her husband in 2006 and later he and I were talking and he mentioned Apple stocks he had was doing good, I decided to buy a few shares just to see how it would do. It has met my hopes for growth and I am pretty sure it will be good for my darling only grand daughter someday when she inherits it. The AZO will be for my DD someday as well!

 

[Montecfo]

I invest in individual stocks mostly. An initial position for me if I am nibbling on a new position is 0.2%.

Most of my positions are between 1 and 5%. I trim anything above 5%.

It is never easy to say of a position is "worthwhile" until you get a lot further down the road with the investment.

And to say it needs to be 10-20% seems very risky. I think most folks agree you want to avoid that type of concentration.

 

[Koolau]

I invest in individual stocks mostly. An initial position for me if I am nibbling on a new position is 0.2%.

Most of my positions are between 1 and 5%. I trim anything above 5%.

It is never easy to say of a position is "worthwhile" until you get a lot further down the road with the investment.

And to say it needs to be 10-20% seems very risky. I think most folks agree you want to avoid that type of concentration.

The only individual stock I own is old Megacorp. As it was (and is) a part of my 401(k), it has varied over the years as I've trimmed it - time and time again. There was a time when I was still w*rking that it was close to 75% of my invested assets. At that time, we were not allowed to sell the stock without a withdrawal. That changed and I sold most of the stock and diversified within my 401(k) plan. Now, as luck (or good corporate management) would have it, the stock has again increased in value - a lot. It's perhaps 20% of my stash. I keep thinking I should sell some, but after 50 years, I keep telling myself "never bet against Megacorp." YMMV