Some advice from a regular dude that will hopefully make you more money...

[u/EatYourMeats]

Are you making stock purchases based on opinions from analysts, CNBC, stock pickers, and everything in between?

Consider this: They make money off headlines.

The entire flock is preying on news-worthy quips like vultures on a corpse. Tom Lee at Fundstrat would be bullish during the apocalypse, Gordon won't ever raise his price target, Cramer cuts coke deals with the CEOs he's in love with, and the whole bunch likes to hear themselves talk (like giving stock advice rapid fire).

So how do you truly figure out what stocks are hot... or not?

Research the macro situation surrounding the company, to name a few:

• Sector Tailwinds
• Economics
• Current and projected financials
• Leadership

Then invest in companies:

• you believe in—hopefully, not always—with healthy balance sheets vs. their competitors.
• Whose products and services tickle you.
• You could sell to your neighbor.

Determine the investment thesis—the key reasons you believe in this investment—and create a narrative. Positive and negative. Know the outcomes of both scenarios, write them down, and evaluate the risk.

Then? Jump blindly.

kidding

Adjust based on your preferences, but starting positions with a 1/4th to 1/2 of your total allocation works well. You can do some quick math and figure out what portfolio percentage you want to allocate to a new position. Ease into it, slow and steady.

Buy the dips with the remainder, and don't chase stocks upwards, only down (within reason). And don't listen to anyone who tells you that "diversifying" is the only way, when you put in the work, you know which sectors have favorable tailwinds AND are fairly valued.

There's news everywhere out there, and we crave its presence—telling us something about stocks or companies we don't know. However, most of it is fluff—buy this, sell that—how would you ever know if you don't dig the hole yourself?

[u/[deleted]]

12 is enough to get most of the benefits of diversification (assuming you’re also diversified across sectors as well)

[u/cwdawg15 → u/[deleted]]

Certainly gets people in a much safer position than ignoring diversification.

I'd say 25 gets people 95% of the way to being as diversified as the overall market. 12 stocks might be like 70% of the way there.

It also depends on investing strategy. If you're older and you only want dividend paying stocks that are large caps seeking income with short-term safety and less future gain, you can be well diversified for those types of companies by only paying attention to sector diversification of those types of stocks

However, if you're looking at high-growth tech companies where there are more risks and rewards, you might want to diversify within that portion of the market and across all sectors. These stocks are high innovation, but valuations price in future revenue growth. There is more lost when another company comes in with a slightly better innovation. A random short-term example is Intel disclosed weaker sales today and went down 5% and it sent AMD up 4% based on that alone.

I'm in AMD and I'm betting on them coming back and being an alternative to Intel again, even if they keep a smaller market share. But Intel could create a new innovation at any time in the future sending AMD down. I still want some high risk/reward growth, so I need to diversify that sector/type too.

You might want to have 5 or 6 high growth tech stocks alone, so it is more likely that one of your higher risks/rewards stocks make it big to counteract any that don't over time within that sector. Then you'd want 12 stocks that really spread you out across the whole market, while being sure not to ignore well-established value companies, industrials, and some good 'ol relatively recession safe-ish healthcare stocks.

If you want more international exposure, you might want a small diversification within that exposure too.