1. Narrow down Your Selection
Having a large watchlist of different companies from different sectors is fine. It allows you to capture quick information on specific companies you are interested in staying up to date on. The issue is that you believe that you should invest in a large majority of the companies on your watchlist. You should not.
When it comes to investing, you need to narrow down your selection to the choices that will provide you with the best returns in the long run. All the companies in your watchlist can be good, but are they all the best choice for you?
In being selective, you are taking the stress out of investing for yourself. If you have trouble being selective, consider going the route of investing in an index fund or ETF. For example, if you desire to hold over 10 different information technology stocks, you should consider looking to invest in an index fund such as the Vanguard Information Technology Index Fund (VITAX) or an ETF such as the Vanguard Information Technology ETF (VGT).
2. Understand Your Portfolio Allocation and Risks
Understanding the allocation of your holdings and the risks you are taking regarding your holdings is important. Being diversified is great, but there is a balance that is necessary when it comes to diversifying your portfolio and maintaining being selective.
For example, if the largest holding in your portfolio makes up less than 5% of your portfolio, you are likely spreading yourself thin. That is risky due to you ineffectively trying to replicate an index fund or ETF with your holdings. It would be more efficient for you to invest in an index fund or ETF.
On the flip side, if the largest holding in your portfolio makes up over 25% of your portfolio, you are overexposing yourself to the risks of that one company. You are making yourself vulnerable to the unsystematic risks of that company, such as regulatory issues, management changes, and labor disputes.
Balance is important when it comes to your portfolio allocation and risks. It is also important when it comes to being selective. You do not want to pick every company to invest in. You also do not want to be overly selective and put yourself in risky situations that can cost you money.
3. Avoid over Following the News
Reading, watching, and listening to the news to stay up to date on the financial markets is important, to an extent. You want to be knowledgeable of our current financial landscape, but you do not want to let the news sway you in wanting to invest in companies you would have never considered.
For example, if your favorite news source repeatedly mentions Companies A through E coming close to a Covid-19 vaccine, that does not mean it is time for you to consider investing in 5 different companies.
The news should just be used for informational purposes. When it comes to making investment decisions, the decisions should be because of the research and due diligence you have conducted. Every company mentioned in the news is not worth your time.