Over the past few weeks, I have been getting a version of the same question.
"Bjorn, should I buy this stock?" "What about that one? It all sounds so good!!" "I bought a little, is that enough?"
I think it’s also because of how we’ve seen AI and semiconductor stocks running. New names keep surfacing, and suddenly everything sounds like the next best thing.
It has gotten me thinking about something I believe most investors get wrong, and it is not the stocks they pick.
It is how they think about building a portfolio in the first place.
When it comes to building a portfolio, there are essentially two approaches.
The first is diversification - spreading your money across many different stocks to reduce the risk that any single position hurts you badly.
The second is concentration - going deeper on fewer names, betting with more conviction on the businesses you understand best.
Neither is wrong on its own. Both can work. But both can also go badly wrong when applied without self-awareness.
And right now, with so many exciting names in the market, most investors are drifting toward one extreme without even realizing it.
The Buffet Trap
Everyone loves a good buffet right?
The spread looks incredible. Everything seems worth trying. So you pile a little of this, a little of that, working your way down the line. By the time you reach your table, the plate is overflowing.
You are trying so many things that you barely taste any of it. You take one small bite of something, and before you have even figured out whether you like it, you have already moved on to the next dish.
By the time you finish the meal, you cannot even remember what the first few things tasted like. Or worse, you don’t even finish everything.
That is what a portfolio of thirty stocks looks like. A little position here, a little there, moving so fast between names that you never really understand what you own. One piece of news drops and you do not know whether to hold or sell, because you never knew the business well enough in the first place.
Or worst.. you forgot that you even had that position!
The One-Dish Trap
If the buffet trap is grabbing a little bit of everything, the one-dish trap is loading your entire plate with less than a handful of items (or worst, just one).
You are so convicted about it that you ignore the whole spread in front of you.
Imagine you went in with high conviction. One business, big allocation. The logic felt sound - if you believe in it, why not back it with real size right?
But if you were highly concentrated going into the 2022 bear market, every red day hits differently. Your conviction gets tested in ways you are simply not prepared for until you have lived through it. You start second-guessing your thesis. You start wondering if the whole framework was wrong.
And that emotional pressure is often what leads people to sell at exactly the wrong moment.
Too concentrated in the wrong companies, with the wrong market conditions, and you do not just lose money. You lose clarity.
If this feels familiar, I created a short Investor Clarity Check for readers who want to understand what’s really holding their investing back.
It’ll help you to reflect on where you are, what you’re trying to build, and where you might need more clarity.
Your Risk Profile Is Yours Alone
So should you be more diversified or concentrated? What is the right number of stocks for you?
Here is the honest answer: I am not going to give you a number, because the right number is different for every single person. What matters is understanding the factors that shape your own risk profile.
Age plays a big role. Younger investors have time on their side, which means they can absorb more volatility and recover from mistakes. As you get older and closer to needing your capital, preserving what you have built starts to matter more than chasing growth.
Experience and knowledge go hand in hand. The more you genuinely understand about a business or an industry, the calmer you will be when that stock moves against you. Knowledge is one of the most underrated forms of risk management. When you understand why a company is good, a 20% drawdown feels like an opportunity. When you do not, it feels like a catastrophe.
Commitments matter too. As life progresses, so do your responsibilities. A mortgage, young children, ageing parents, the more you are carrying, the less financial turbulence you can realistically absorb. Your portfolio has to fit your actual life, not an ideal version of it.
Income and spending habits also factor in, though perhaps not in the way most people expect. A high income does not automatically mean you can take more risk. What actually determines your flexibility is your savings margin. A disciplined saver on a modest income often has more room to maneuver than a high earner burning through their salary every month.
The Better Question
The goal was never diversification for its own sake. And it was never concentration just because it sounds bold.
Size your positions in a way that is meaningful enough to move the needle, but not so large that a bad month keeps you up at night.
It is building a portfolio you can hold with patience and clarity, through whatever the market decides to do next.
Because the investors who build real wealth are not the ones who had the perfect number of stocks. They are the ones who understood what they owned.
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And as always -
Patience builds wealth,
Bjorn
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