 The eternal question is how many stocks should I have in my portfolio? Some say to be diversified, some say to keep all your eggs in a few baskets. So what's the real answer? What should you do? Well that depends on one thing and one thing only. How much you know? Buffett says that diversifying is protection against ignorance and I'll show you in this video what does he mean with that saying and how you can protect yourself from ignorance and increase your returns and lower your risks as that is the main point in investing. The modern portfolio theory says that you should have at least 30 stocks in your portfolio because then the risk will be equal to the market risk. So you can have good returns but at the market risk. However, here we can see that already with 10 stocks the total portfolio risk is much much lower with only one stock your standard deviation is very high. The more stocks you add the lower is your risk and the closer is it to the market risk. However, there is not much of a difference between owning 10 stocks in a portfolio and owning 100 stocks in a portfolio. Therefore, you have to ask yourself what do I want? Do I want to own the 10 best stocks I know? Or do I want to own also the 98 stocks that is not that good as my first, second, third investment? That's a question you have to ask yourself. Now the only way to own the least possible number of stocks is to invest from a business-like perspective. We discussed how to invest from a business-like perspective, how to be an entrepreneur when investing and when you do that, you invest only in the best businesses. One, two, three, I do. I invest in five stocks maximally. Three are my top positions and I like to own those companies from a business perspective. I feel like an owner. I don't care so much about short-term volatility, especially about 10-20% here and there. When it moves 100-200%, then I take a look. Until then, I'm very happy with the earnings yield, with the improvements in book value, with the dividends and those kind of things. So if you look at from a business perspective, I bet you you can look at all your portfolio holdings and say, okay, this is the best business. This is the worst business at this price. So my question is why are you holding the worst business when this much, this one is so much better? This is because you look at stock price and you try to achieve gains from speculating, not from owning a business. The second question I want to ask you is, do you know what you're doing? If we look at this chart that shows the total returns of individual stocks versus the Russell 3000 index from 1983 to 2006, we can see that 64% of all stocks underperformed the index, while only 36% of stocks outperformed the index. And of all the stocks, 6.1% of them outperformed the index by 500% of more. So in order to get that stock that will outperform by 500%, you have to pick the best out of 16 stocks, so 6.1% of 100 stocks. So if you look at 100 stocks, only six of them will significantly outperform the market. And that's what you have to look at. How to find that? Well, focus on business, focus on fundamentals and keep following this channel. So you don't need to look at the whole stock environment. If you take, if you look at 200 stocks, 12 of them will significantly outperform the market. And you need just five of them over your lifetime and you are set. Do not overcomplicate your investing. If you get five stocks that outperform the market by 500% or more in 10, 20 years, your returns will be extremely extraordinary. So if you focus on what you're doing, look at businesses, look at the quality of earnings, future potential earnings, the risks, then you're set. Then you can have a concentrated portfolio. If you don't have the time or the willingness to do that, then it's better to have a diversified portfolio. However, the more you invest your time, the more you try to find those businesses that will outperform the higher will your returns be and lower the risk, lower the loss. To conclude with the problem of diversification, you have seen that 64% of stocks underperformed the market. This means that with every addition to your portfolio, you increase your chances of underperforming. If you hold the top stocks, you increase your chances of outperforming the market because there is a higher probability that the ones you hold will be the best stocks. If you keep adding new stocks, you go into the 64% basket that underperforms the market. So you're with adding more and more stocks, you are practically lowering your chances of high investment returns and you're practically what you're doing is underperforming the market. That's statistics. So don't argue with that. Thank you for watching. Looking forward to your comments, tell me how many stocks do you have in your portfolio? That's what I really want to know. And how do you see that positioning for your long-term investment returns? And if this 64% underperforming changes your investment perspective? Thanks for watching. Appreciate your positive input on this channel. Click like if you like the content and I'll see you in the next video.