My 0.001% stock market journey

What should be the ideal number of stocks in a long term portfolio?

Everyone must have this thought somewhere that how many stocks should be there in an ideal long term portfolio?

The average answer will be around 15 and maximum 30.

Let us take 20 stocks for example.

Now the second question is, how much allocation should be made according to the market cap?

The ideal allocation ratio; *
Large Cap : 50% | Mid Cap : 30% | Small Cap : 20%

The third question is how much allocation should be there in a stock?
Ideal allocation to one stock should not exceed 15% of total Portfolio Value.

The fourth question is, sector allocation?
Ideal allocation to one sector should not exceed 20% of total Portfolio Value.

Last but not the least, the fifth question is which 20 stocks should we invest in?
I asked many people/experts about this and almost everyone gave different suggestions but the most common 3-6 stock suggestions I got are; Reliance, ITC, TCS, Airtel, HDFC Bank, L&T etc.

Let us assume for a moment that we invest in all these 6 stocks, but there are still 14 stocks left to choose.

I started asking again and the names of 3 more stocks turned out to be similar. CDSL, SBIN & Eicher Motor.

So now I had 6 + 3 = 9 stock list. There were still 11 stocks left.

Now when I asked about these the common answer was that it is up to you as the allocation depends on various factors like risk tolerance, investment horizon and goals.

My personal conclusion so far is that whenever we ask for advice on building an ideal portfolio, the answer we get is very conservative and the stock recommendation is not 20 but around 10. This doesn’t mean that the experts are wrong but nobody wants to spoil their image so they give suggestions on the safe side.

The story is not over yet because I want to create a portfolio of 20 stocks, so now I started thinking again and I tried to think about it from a different perspective.

My different approach was, if I assume that SEBI rule is that we can hold maximum 20 shares in our demat account, then which 20 shares will I choose?

This approach solved 80% of my problem because now my job was to select the best 20 stocks that would help me create wealth. I named this long-term portfolio, Wealth Over Money

This reminded me of the Pareto principle, which says that 80% of outcomes results from 20% of causes.

Picking the best 20 stocks is not as easy as it seemed.
We live in an era where there is an abundance of information. We keep getting new news every minute and it keeps distracting us from our goals.

I can say I have identified 7-10 stocks for myself, but honestly, I am still not able to identify the 20 best stocks that I can confidently say I will hold for the next decade.

If I ask you the same question that assume that SEBI has a rule that you can keep a maximum of 20 stocks in your portfolio, then which stocks will you choose in your Wealth Over Money Portfolio?