How Many Stocks Should You Own? The Portfolio Size Question Explained

One of the most common questions new investors ask is: how many stocks should I own? The answer isn’t straightforward, because it depends on your investment strategy, risk tolerance, and available time. Some investors swear by owning dozens of individual stocks, while others prefer the simplicity of a few exchange-traded funds (ETFs). Understanding the difference between these approaches can help you make a more informed decision about your own portfolio.

The Classic Diversification Rule: 20-30 Stocks as Your Benchmark

Financial advisors have long recommended that a well-diversified portfolio should contain somewhere between 20 and 30 stocks across various market sectors. The logic is solid: when you spread your money across enough holdings, any single stock’s poor performance won’t devastate your entire portfolio. If one company faces a downturn or makes a bad strategic decision, the impact is absorbed by your other winners.

But here’s where the math gets interesting. If you’re buying individual stocks directly, reaching that 20-30 target can be expensive and time-consuming. Most stocks trade at prices that mean you’d need hundreds or even thousands of dollars just to build a modestly diversified portfolio. For many beginning investors, this barrier to entry is simply too high.

This is where ETFs change the game. A single S&P 500 ETF can give you exposure to 500 different companies across multiple sectors—sometimes for as little as a couple hundred dollars. You get the diversification benefit of owning 20-30 stocks (or far more) without the complexity or capital requirements of hand-picking each one. In this sense, one ETF can do the heavy lifting of a diversified portfolio that might otherwise take dozens of individual stock purchases to construct.

The Customization Question: Can You Afford to Be Picky?

The major trade-off with ETFs is control. When you buy an ETF, you’re accepting everything inside it—every stock, every sector weighting, every strategic choice made by the fund manager. If you believe a particular industry is headed for trouble, or if you’d simply prefer not to own certain companies for personal reasons, tough luck. ETFs don’t offer opt-out options.

Individual stocks, by contrast, let you cherry-pick exactly which companies deserve your money. You can avoid sectors you dislike, double down on industries you believe in, and actively manage your portfolio as conditions change. The freedom is real and valuable—if you have the expertise to use it wisely.

The catch? This flexibility demands research. Picking 20-30 stocks that actually outperform the market requires genuine skill, discipline, and ongoing monitoring. Most casual investors don’t have the time or expertise to do this well, which is why many end up either owning too few stocks (risking concentration of losses) or holding a scattered collection of underperformers.

The Risk vs. Return Reality: Diversification Has a Price

Here’s an uncomfortable truth about diversification: the same spreading of risk that protects you from catastrophic losses also prevents you from capturing outsized gains. When you own hundreds of stocks through an ETF or a broad index fund, the vast majority will generate average returns. Maybe a few will be stars, but many will be mediocre. On balance, your returns will mirror the market average—which isn’t bad, but it’s not exceptional either.

Investors with strong conviction and research skills can theoretically build a portfolio of 10-15 carefully selected stocks that outperform the broader market. These concentrated portfolios accept more risk but offer the potential for better returns. This approach works brilliantly for the small percentage of investors with genuine stock-picking talent. For everyone else, it’s usually a recipe for disappointment.

The question, then, isn’t just “how many stocks should I own?” but rather “how many can I successfully manage?” For most people, the answer is fewer than they think—and the simplest solution might be to let an ETF handle the diversification while they focus on choosing the right funds for their overall strategy.

Finding Your Sweet Spot: The Right Portfolio Size for You

So what’s the ideal number? It genuinely depends on your situation:

• Beginning investors with limited capital: Start with 1-3 ETFs to build a diversified foundation. This gives you broad exposure without requiring thousands in initial investment.

• Intermediate investors with growing knowledge: You might hold 5-10 individual stocks plus 2-3 ETFs. This balances your desire to pick winners with the safety net of broad diversification.

• Experienced investors with time and expertise: You can manage 20-30 individual stocks plus selective ETF positions, actively rebalancing and adjusting as markets evolve.

The real insight is this: whether you own 5 stocks or 50, what matters most is intentionality. Are you holding a particular stock or fund because you’ve researched it and it fits your strategy? Or did you just buy something because it sounded promising? The number on its own means very little.

The best portfolio—for you—is the one that matches your goals, fits your risk tolerance, and requires only the amount of active management you can realistically maintain. For many people, that means a smaller number of holdings than conventional wisdom suggests. Quality and focus often beat quantity and sprawl.