When you put together a portfolio, I believe about five to ten stocks is an adequate amount before it starts getting hard to keep up with an individual stock's progress. It may take an hour each week for each one. If you are working full-time, you may have a spare five to ten hours per week to devote to this. Above that and the task becomes harder.
Five is a good, round size for a portfolio to start out with. You aren't married to any of the stocks and you can review them every three to six months to make sure things are going as planned. For those that make the grade, they can get another injection of investment money. The others get adjusted or culled.
If you've figured out you made a wrong move with one of them, that's okay. Even seasoned stock pickers may be right only 50%-60% of the time. You can scale into successful gains and reduce the losers.
Here's a five-stock sample portfolio that has some good brand name companies, growth potential and diversification in different industries.
First, I want a solid brand name stock that people use everyday. That sounds like Domino's Pizza Enterprises Ltd (ASX: DMP). It is growing domestically as well as overseas in Japan. Apart from Pizza Hut, there aren't many takeaway pizza chains in Australia that can match its large store network and promotional marketing.
Another well-known brand is the retail distributor Breville Group Ltd (ASX: BRG). It has successfully gotten its electric appliance products like Kambrook and Ronson into many white goods stores and supermarkets. Its current strategy of expanding into the UK with a new premium product line sets it up for good growth also.
Another brand that many people use when they think of property is realestate.com.au, operated by REA Group Limited (ASX: REA). The number one real estate listing website is where people go to look for homes and the place where vendors want their home to be seen. That popularity means more business and potentially more earnings for shareholders.
Ramsay Health Care Limited (ASX: RHC) would cover the need for a defensive stock, yet the private hospital operator is recently growing at a healthy pace as well, so two gold stars for it. More acquisitions are expanding its hospital numbers.
Lastly, a company that has a good track record for steadily growing revenue and good margins is Mcmillan Shakespeare Limited (ASX: MMS), the vehicle fleet manager and salary packaging service provider.
The setback it experienced in 2013 was a one-off affair. When the revenue and earnings of the full-year result showing things are back to normal, investors should feel more certain things are solid.
Foolish takeaway
They each have something special that either drives growth or allows them to charge a premium for their service. That helps earnings to be more reliable and business growth comes from the excess money they generate.