How Many Stocks?

Q What’s the best number of stocks to own? — G.E., Garden City, Idaho

A It depends. The fewer you own, the greater impact each stock may have on your portfolio — for good or bad. The more you own, the less risk there is of having too many eggs in one basket.

For best results, you should keep up with the stocks you buy so you can notice if and when they no longer inspire confidence. That means, ideally, reading their quarterly and annual reports and following them in the news.

Sometimes a great-performing stock can come to dominate your portfolio. If, for example, one stock has grown to represent 50% of your portfolio’s value, you’ll have a lot riding on that one company. You might consider selling some shares and moving that money into another stock in which you have great confidence — perhaps one you already own.

Aiming to own at least 25 stocks can keep you diversified. The savvier an investor you are, the fewer you might own, and vice versa. If you can’t spare the time to choose and follow individual companies, you can do very well just sticking with broad-market index funds that allow you to invest in hundreds of companies with little work required. Learn about them by searching for the terms “index fund” and “Motley Fool” online. Or invest mostly in index funds with a few stocks on the side.

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Q What’s Nasdaq? — G.L., Kailua, Hawaii

A The Nasdaq is one of the two major United States stock exchanges, along with the New York Stock Exchange. It’s where more than 2,500 companies’ stocks are traded — many of which are technologyheavy, such as Apple, Amazon, Microsoft and Tesla.

Want more information about stocks? Send us an email to foolnews@fool.com.