A right stock allocation can make fortune for the investors. These different types of stocks that makes ideal stock portfolio are unbeatable.
Every investor wants to select the best performing stocks in his/her portfolio. But, they are often confused about which & how many stocks to include in a solid portfolio.
Although, there is no official magic number of stocks you should own in a portfolio but a well-diversified portfolio can maximize profits by minimizing risk.
According to a post published in CNN, a well-diversified stock portfolio should consist of 15 to 20 stocks, across seven or different industries.
This range allows investors to keep track of each stock quite effectively. First-time investors are also confused about the percentage of portfolio to be allotted to a particular stock.
Generally, there is no single answer to such questions. It is due to the fact that stock allocation in a portfolio depends on number of factors.
Some of these factors affecting an ideal stock portfolio include country of residence and investment, time horizon, prevailing market conditions, propensity for reading markets news, keeping up-to-date on holdings & many more.
You just need to identify the right stocks at the right time & keep accumulating them for long term gains. Here are 10 different categories of stocks that form solid & profitable stock portfolio:
(1) Growth Stocks: 10 to 15% Of An Ideal Stock Portfolio
It is one of the most significant types of stocks that makes ideal stock portfolio. Growth stocks are securities of companies whose earnings are expected to grow significantly faster than other stocks in the market.
This growth rate is usually reflected through an increase in share price. They offer greater potential rewards but can be risky over time. These stocks don’t pay a dividend to its shareholders.
It is due to the fact that company would prefer to reinvest retained earnings in capital projects. These stocks are mostly overvalued because market sees them as money-makers.
Technology companies are the best examples of growth stocks. It is due to the presence of virtually limitless opportunities for advancement.
Some of the unique characteristics of growth stocks include presence of loyal customer base or firm grasp on majority market share, first to offer a new product or service, a breakthrough patent, fueling expansion projects & many more.
Thus, investors can buy growth stocks anywhere from 10 to 15% of their portfolio value to gain better rewards depending on risk tolerance.
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