Last week, when I shared my portfolio in another article. I received comments privately from several people such as “50 stocks in your portfolio?!?! I think 30 should provide more than enough diversification”, “Have you heard of Warren Buffet’s 20 slot rules?”, “Why are you holding so many different stocks?” etc.
Well, there are a few reasons to this.
1) I have yet to devise or find a sound approach on deciding when to sell and what to sell. Thus I am currently only buying and not selling yet. I am working on it though.
2) The academic in me believes in the Modern Portfolio Theory which basically states that diversification reduces unsystematic risk. Although some books suggest that you will come close to optimal diversity with just 12 stocks, in theory, you need infinite stocks to completely remove all unsystematic risk.
3) And yes, I agree and know that holding a large number of stocks is unlikely to allow me to have returns like Warren Buffet. What I am actually aiming for is a low-risk and stable income through my stock investments so that I can venture into other more high-risk but fun projects such as Angel-investing or even doing my own startup.
The only good thing that came out of my recent India trip was that I managed to meet up with a good friend there and spent hours chatting with him. From the time I knew him when we were colleagues in Japan more than three years ago, he has always been passionate about doing things that matter; things that change and improve lives. Now, I can sense that he is more spirited than ever as he heads a startup working on innovating the education industry of India.
While I can see many strengths of his startup such as the market size, user-stickiness, strong investor backing, etc, I was most impressed by his energy and zeal. As I was also looking for some high-risk venture or business to invest in, what better opportunity could there be than to invest in this trusted friend of mine?
As a first-time Angel investor, one difference I felt between Angel investing and investing in listed companies is that I feel good about supporting and being a part of a dream to make the world a better place!
