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  • Writer's pictureIshfaaq Peerally

Portfolio Allocation - How much of your portfolio to put in a stock?

The most popular question I get about investing is, "What is the next GameStop?" $GME . My answer is always the same, "If I knew, it would be 100% of my portfolio."

Even when I was almost 100% sure that GameStop would be a ten bagger, it was never the whole of my portfolio. It ranged from 8% to 40%.

Ideally, you would want to invest in a single company if you had absolute control over the company, that is, you own the whole business, and you run it. Most fortunes have been made like this. But it is risky. To lower the risk, you can invest in other companies and have a diversified portfolio.

How many stocks should you have in your portfolio? It depends on how many stocks you can follow at the same time.

To know how much of your portfolio should be in a particular company, you need to consider the risk-reward asymmetry. What is the probability the investment goes to zero, that is the maximum risk? and what is the expected returns on this investment?

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