How to beat the pros, Part 1: Choose the right number of stocks to hold

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15 to 20 securities is all it takes

Is beating the pros possible? Yes! In this six-part series, Jason Del Vicario, CFA, portfolio manager, and Steven Chen, MBA, analyst, at HillsideWealth | iA Private Wealth Inc. will explain why - and how - a concentrated portfolio of global high-quality stocks gives the long-term investor the best chance to outperform both broadly diversified indexes as well as professional money managers.

A professional portfolio manager allocating billions cannot own just 15-25 positions - the career risk in underperforming an index is too great of a force. But the small retail investor can stick to that limited number of stock holdings. In addition, while the professional portfolio manager is generally limited to fishing in ‘large cap’ ponds, the smaller investor can leverage their scale advantage by fishing in less crowded waters. They are free not to follow the herd.

An investor who focuses on the prosperity of the underlying business over the long term can build a highly concentrated portfolio that is more diversified than many would think. Here’s an example: UK-based Bioventix provides crucial antibody technology for multi-national diagnostics companies. Whenever a patient has a blood test for vitamin D deficiency in Asia, Europe or North America, it’s likely that Bioventix is earning a royalty fee.

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