How big should any one stock in your portfolio get? Here’s a way to figure it out

By News Room Last updated Nov 5, 2023

Here’s our Club Mailbag email [email protected] — so you send your questions directly to Jim Cramer and his team of analysts. We can’t offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries. This week’s question: What is the full position of the stocks in the portfolio? How do we establish that level for ourselves? — Scott L. Great question. It really depends on the investor. We own 30-plus stocks, so we try not to exceed about 5% to 6% in any one position. This ensures that we remain diversified and that no single stock has too much impact on the portfolio. Currently, only Apple (AAPL) has a weighting above 5% (5.6%). We have had to trim our Apple position in the past when it has grown beyond 6%. We don’t recommend that members own 30 or more stocks. Our rule of thumb: Do one hour of homework a week on each stock to keep on top of things. That time can add up pretty quickly as you add more stocks. In addition to Jim, who seems to not require sleep, we have two analysts and an entire editorial team doing research. This is how we stay current with each of our holdings. For most members, it makes better sense to identify five to ten stocks across various sectors. Those with more time to dedicate to their portfolio can obviously add more. We will always provide our research and trading decisions for every stock in the portfolio and bullpen. Just try to stay diversified, which means not owning the Magnificent Seven — Apple, Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Meta Platforms (META), Alphabet (GOOGL) and Tesla (TSLA). If you own five stocks, a full position could be as much as 20%, depending on the size of your cash position. With ten stocks, the full position could be closer to 10%, assuming an equally weighted portfolio. Of course, even if diversified, those are certainly large positions. Some investors will not be comfortable with so much riding on any singly company. You can also decide on smaller weightings. We always recommend an investor’s first $10,000 should go to an S & P 500 index fund. So one option for putting all your money to work without making any one stock position too big is to keep adding to your index fund. For example, you can own 10 stocks with full positions of 5% and allocate the other 50% to the index fund and cash. Or maybe you own five names at 8% each, 15% in cash, and the remaining 45% in an index fund. There are many ways to slice this up. A “full” position will differ for every investor. What’s most important to consider is your comfort level and appetite for risk. The smaller the full position, the less risk any one stock’s performance can blow up your portfolio. (See here for a full list of the stocks INJim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Apple’s new Vision Pro virtual reality headset is displayed during Apple’s Worldwide Developers Conference (WWDC) at the Apple Park campus in Cupertino, California, on June 5, 2023.

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This week’s question: What is the full position of the stocks in the portfolio? How do we establish that level for ourselves? — Scott L.

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