Asset Allocation

The minimum number of slots you should divide your portfolio gets determined by:

In my case, that magic number is 20/2 = 10.

So, I’ve divided my portfolio in 10 slots, equally weighted. Why equally weighted?

Cash:

I like to always keep a bullet in the chamber. I recommend keeping at least one slot in cash. In my case, I tend to have 2 slots in cash.

Maximum number of slots:

There isn’t any rule for that. But for experience, an individual investor does not have the capacity (in terms of time and money) to invest in more than 15 stocks. I feel that 10-12 it’s a good number for me.

Diversification:

This would be my ideal diversification.

CompanyTickerCurrencyAcquisition PriceWeightReturn
LVMHMC.PAEUR35020.58%46.77%
PUMAPUM.DEEUR5519.10%50.65%
AUTOZONEAZOUSD113516.47%1.42%
DIGITAL VALUEDGV.MIEUR3116.24%12.17%
STANDARD & POORS GLOBALSPGIUSD35013.89%-7.5%
UNILEVERUNA.ASEUR4613.71%4.19%

Quality – Momentum stocks not paying dividends usually are growing stocks, assuming most likely a higher volatility than the dividend ones.
Then, I do not to repite industries. In essence, I go for the best stock in the industry and then I forget about that industry while I’m invested.
Regarding the currencies, I’m an european investor and I plan to get my retirement pension in Euros, so I have a strong home bias. Nevertheless, a country/currency diversification in some proportion is desirable.

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