Like investment strategies, we could debate the merits of diversification until the cows come home. Some people feel comfortable with a small number of companies in their portfolio. When you consider the amount of money he has invested, Warren Buffett has a relatively small number of companies in his portfolio. When he buys, however, he buys big, taking large positions in companies he considers have outstanding prospects. Buffett says that truly great companies are rare, and when you find one available at an attractive price, you should buy up big.
Some people like to own shares in many different companies.
I know of some people who hold shares in about 30 or 40 companies. However, studies have shown that a portfolio with more than about 15 companies in it actually increases the risk factor. With a portfolio that size, it is also very difficult to follow the progress of each and every company. Here at the Qualiport, we feel comfortable with a portfolio of between 8 and 12 companies. To us, a portfolio of just four companies, such as we've got at the moment, is not sufficiently diversified.