Q: At what point is it feasible to allocate a percentage value to stocks in a portfolio, as opposed to a dollar value? For instance, if an investor starts out with $100,000 in cash, it's easy to pick 20 stocks and allocate 5% to each to come up with a nicely rounded, well diversified portfolio. But, if an investor is starting out with only $50,000, or $25,000, does the same principle apply? Or should one arbitrarily assign a dollar value -- perhaps min. of $5000 per stock, and build from there ... so that a $25K portfolio might only have 5 good stocks in different sectors? Would that be enough protection/diversity?
I'm asking this to set the course for a few young adults in my family (nieces, nephews) who are starting out on their investment life, and are inheriting some funds.
As a follow up to that thought, would you structure this amount of cash differently for a 25 year old than you might for a 45 year old, with the same amount of cash?
Thanks for your help and insight, as always.
I'm asking this to set the course for a few young adults in my family (nieces, nephews) who are starting out on their investment life, and are inheriting some funds.
As a follow up to that thought, would you structure this amount of cash differently for a 25 year old than you might for a 45 year old, with the same amount of cash?
Thanks for your help and insight, as always.
