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What is the minimum size (percentage) holding that is worthwhile?
Old 02-23-2024, 06:31 AM   #1
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What is the minimum size (percentage) holding that is worthwhile?

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.
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Old 02-23-2024, 06:37 AM   #2
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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.
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Old 02-23-2024, 06:46 AM   #3
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Quote:
Originally Posted by rayvt View Post
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.
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Old 02-23-2024, 06:46 AM   #4
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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.)
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Old 02-23-2024, 06:50 AM   #5
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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.
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Old 02-23-2024, 07:00 AM   #6
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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%.
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Old 02-23-2024, 07:05 AM   #7
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Min 10-20%.
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Old 02-23-2024, 07:12 AM   #8
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Some folks have their bulk in index funds and 5% in wild money...
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Old 02-23-2024, 07:14 AM   #9
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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.
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Old 02-23-2024, 07:16 AM   #10
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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.
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Old 02-23-2024, 07:25 AM   #11
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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.
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Old 02-23-2024, 07:26 AM   #12
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Some folks have their bulk in index funds and 5% in wild money...
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Old 02-23-2024, 07:29 AM   #13
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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.
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Old 02-23-2024, 07:35 AM   #14
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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.
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Old 02-23-2024, 07:41 AM   #15
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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?
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Old 02-23-2024, 09:19 AM   #16
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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.
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Old 02-23-2024, 09:27 AM   #17
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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.
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Old 02-23-2024, 09:42 AM   #18
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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.
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Old 02-23-2024, 09:55 AM   #19
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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.
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Old 02-23-2024, 10:01 AM   #20
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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.
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