CNBC Investing Club Mailbag: Understanding the Full Position of Stocks in the Portfolio
In our latest edition of the CNBC Investing Club Mailbag, we tackle an important question from Scott L. He wants to know about the full position of the stocks in our portfolio and how to establish that level for himself.
The answer to this question largely depends on the investor’s preference and risk tolerance. Currently, our portfolio consists of 30-plus stocks, and we aim to keep the position of each stock below 5% to 6%. This approach ensures diversification and prevents any single stock from having too much impact on the overall portfolio.
However, it’s worth noting that Apple (AAPL) currently holds a weighting above 5% with 5.6%. In the past, we have had to trim our Apple position when it exceeded 6%. We don’t recommend owning as many stocks as we do. Our rule of thumb is to spend an hour each week researching each stock in the portfolio to stay informed.
In addition to Jim Cramer, who seems to never sleep, we have two analysts and an entire editorial team dedicated to research. This is how we stay current with each holding. For most members, it makes more sense to identify five to ten stocks across various sectors. Of course, those with more time can add more to their portfolio.
We always provide research and trading decisions for every stock in our portfolio and bullpen. However, we advise against owning the “Magnificent Seven” stocks, including Apple, Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Meta Platforms (META), Alphabet (GOOGL), and Tesla (TSLA).
When it comes to determining the size of a full position, it depends on the number of stocks in one’s portfolio and the available cash position. For example, if an investor owns five stocks, a full position could be as much as 20% of their portfolio, assuming an equally weighted approach. With ten stocks, the full position could be closer to 10%. However, some may prefer smaller weightings to reduce risk.
One strategy we recommend is allocating an investor’s first $10,000 to an S&P 500 index fund. This allows for diversification without any one stock dominating the portfolio. Additional funds can then be dispersed among individual stocks. For instance, an investor may choose to own 10 stocks with 5% full positions, allocating the remaining balance to the index fund and cash. Alternatively, they could opt for five stocks with 8% each, 15% in cash, and the remaining 45% in an index fund.
Ultimately, the determination of a “full” position is subjective and varies for each investor. It’s important to consider your comfort level and risk appetite. Smaller full positions reduce the risk of a single stock’s performance significantly impacting the overall portfolio.
As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive trade alerts before Jim makes any moves. Jim waits 45 minutes after sending a trade alert before executing a trade in his charitable trust’s portfolio. If he discusses a stock on CNBC TV, he waits 72 hours after issuing the trade alert to make the trade.
Remember, the information provided in connection with the Investing Club is subject to our Terms and Conditions, Privacy Policy, and Disclaimer. We do not provide personal investing advice, and no specific outcome or profit is guaranteed.
I have over 10 years of experience in the cryptocurrency industry and I have been on the list of the top authors on LinkedIn for the past 5 years. I have a wealth of knowledge to share with my readers, and my goal is to help them navigate the ever-changing world of cryptocurrencies.
