Should I aim for a million by holding just 10 shares?

Can Harvey Jones aim for a million in his ISA pot by investing in a broad-based portfolio of around 20 FTSE 100 shares, or should he narrow his stock picks?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Private investors can realistically aim for a million in their retirement portfolio. Thousands have done just that in a Stocks and Shares ISA, which was only launched in 1999.

So it can be done in 25 years – well under the typical working lifetime – and probably faster than that with the ISA allowance now £20,000 a year. By generating the average annual FTSE 100 total return of 7% a year, it can be done in just over 21 years.

If I increased my annual return to 10% a year through individual stock picking, I’d get there in just 18 years. But how do I achieve that?

Should you invest £1,000 in J D Wetherspoon Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if J D Wetherspoon Plc made the list?

See the 6 stocks

Today, I have a diversified portfolio of around 20 stocks, mostly culled from the FTSE 100. I also have a handful of exchange traded funds tracking the US S&P 500, US smaller companies and global technology stocks.

I’d like to beat the FTSE 100 index

But let’s leave the trackers out of it for now. They’re just ticking away, giving me exposure to global markets I don’t understand as well.

I worry 20 stocks is too many. Especially when I remember what billionaire investor Warren Buffett said about diversification. He called it “protection against ignorance”

Buffett added: “It makes little sense if you know what you’re doing.” Ouch! Buffett’s spot on, of course. Compared to him, I’ve no idea. So should I educate myself and boil my 20 down to just 10 of my best ideas?

Even Buffett hasn’t gone that far. His Berkshire Hathaway vehicle holds more than 70 stocks. Although with $1.147trn under management rather than my pittance, it has no choice.

So I’m looking at my portfolio, wondering which ones to cull. Pharmaceutical stock GSK (LSE: GSK) leaps out. This is because it raises some difficult questions.

Could GSK shares help me make a million?

If I’d started with the aim of buying just 10 stocks, GSK would have been on the list. It’s a solid dividend growth stock with defensive capabilities. Healthcare stocks are thought to hold their own in a recession, as people still fall ill (possibly more so).

I bought GSK shares in March and June, thinking they looked great value. Personally, I’m down 19.52%. It’s the biggest disappointment in my portfolio. Over 12 months, the GSK share price is down 6.82%.

Created with Highcharts 11.4.3GSK PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

GSK was hit by a massive class action claim over its withdrawn cancer treatment Zantac. That was (largely) settled at the cost of £2.2bn in October, but the relief rally didn’t last long. Investors are now worried about President-elect Donald Trump’s plans for big pharma.

I can soothe myself by celebrating my winners instead. But if GSK was a 10th of my total wealth, I might do something panicky like sell and crystallise that loss.

Diversification gives me the confidence to wait for GSK to recover. So it has an important role to play. Buffett’s right, diversification is protection against ignorance. But until I know everything (ie never), I’ll keep spreading my risk.

I might thin down my 20 stocks but I doubt I’ll ever get it down to 10, or even 15. But I still expect to beat the FTSE 100 as a whole and turbo-charge my returns.

But there may be an even bigger investment opportunity that’s caught my eye:

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in GSK. The Motley Fool UK has recommended GSK. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Income of almost 12%! 3 stunning FTSE dividend stocks now have double-digit yields

Harvey Jones is amazed by the sky-high income on offer from these FTSE 100 dividend stocks, but he's also aware…

Read more »

Investing Articles

As vehicle sales slump, should I buy Tesla stock on the dip?

Andrew Mackie assesses whether Elon Musk’s political leanings are destroying the Tesla brand or is now the time to be…

Read more »

Dividend Shares

Why this stock market correction is great for passive income investors

Jon Smith explains why those looking for passive income from dividends could benefit from the move lower in stock prices…

Read more »

Investing Articles

The FTSE’s tanking. Here’s what I’m doing

In the blink of an eye, the FTSE has fallen more than 10% due to economic uncertainty. Here’s how Edward…

Read more »

US Stock

Apple stock is close to 52-week lows. Should I snap it up now?

Jon Smith discusses the double-digit percentage fall in Apple stock last week and weighs up whether now's the time to…

Read more »

Investing For Beginners

2 FTSE 100 gems that rallied last week as the stock market tumbled

Jon Smith flags up a couple of FTSE 100 shares that actually jumped at a time when most of the…

Read more »

Investing Articles

Glencore’s share price is 53% off its 52-week highs. Is it time to consider buying?

Glencore’s share price has tanked due to concerns over an economic slowdown. Is this an amazing buying opportunity for long-term…

Read more »

Investing Articles

Forecast: in 1 year, the Marks and Spencer share price could be…

The Marks and Spencer share price has hit its highest point since 2016 after more than doubling under the new…

Read more »