| Dear Prosperity Insider,
“How many stocks should I own?”
This is the No. 1 question that fills my inbox from subscribers.
I’ve met folks who own 50 … 100 … even more. They chase every stock tip and end up with a portfolio that looks like a messy junk drawer.
Instead of outperforming the market, they woefully underperform it.
Legendary investor Peter Lynch called it: “Diworsification"
It’s a twist on the word “diversification” — and it describes what happens when investors own too many stocks, spreading themselves so thin that it actually hurts their returns instead of helping.
Warren Buffett said, “Wide diversification is only required when investors do not understand what they are doing.”
But if you know what you are doing, you shouldn’t be diversifying.
Instead, you should be concentrating your investments into a handful of great companies.
Concentration — not over-diversification — is how you build serious wealth.
Some of the most successful investors have highly concentrated portfolios. They might review dozens of opportunities, but they only invest in the ones they believe will bring the best returns.
They focus their wealth on their best ideas.
Most of their time is spent analyzing opportunities and saying no to most of them.
They wait for the “fat pitch” — that rare, high-confidence investment that looks like a near-sure thing.
This is how life-changing wealth is built — through a few big, well-placed bets over time.
In fact, Charlie Munger believed that owning 3 to 5 truly outstanding businesses — ones you understand deeply and believe in long-term — was often better than owning 30 or more.
To Munger, over-diversification wasn't about safety — it was a way to guarantee average results.
So, how do you go about finding these handful of gems? The Simple 3-Step System to Invest
with Conviction — Not Confusion Carefully chosen ideas, nurtured over time, lead to lasting financial success.
In my American Prosperity Report, I send out between 10 to 12 recommendations a year.
You shouldn’t be investing in every single one!
Here’s how I suggest you decide which stocks to buy with a simple process I call Read, Rate, Focus: - READ: Make sure to read each recommendation carefully. We spend dozens of hours researching every stock — digging into the business, financials, risks, and long-term potential — so you don’t have to.
Then, we boil it all down into a clear, concise write-up you can read in 10 minutes or less. You get everything you need to make a smart, informed decision in each monthly issue — without the noise or fluff.
We do the heavy lifting. You focus on what matters.
- RATE: After reading the research, take a moment to rate the opportunity for yourself on a scale from 1 to 10. If you fully understand the business, believe in its long-term growth, and feel the downside risk is limited — that’s a 10.
That’s a fat pitch.
If it doesn’t click with you, or you’re unsure about how the company makes money or where it’s headed — give it a lower score. This simple habit helps you invest with conviction, not confusion.
And it ensures you're only putting money into businesses you truly understand and believe in. - FOCUS: Only invest in stocks you rate 7 or higher. This keeps you focused on high-conviction opportunities — businesses you understand, believe in, and are willing to hold through ups and downs. It’s how you build a portfolio you won’t second-guess.
For example: - If you live in a rural area and own their equipment, you might have more confidence investing in Deere & Co. (DE).
- If you work in the health care industry, you might be more familiar with HCA Healthcare (HCA).
- If you work in tech, you might be able to grasp Marvell Technology's (MRVL) amazing potential.
If the stock rates a 7 or higher, ask yourself this question:
Am I comfortable investing a big chunk of my net worth in this company and holding it for 20 years?
Of course, you don’t actually have to hold it for 20 years — but this mindset helps you think like an owner, not a renter.
By following this approach, you’ll likely find perhaps 2 or 3 opportunities a year — and that’s exactly what you want.
Instead of your portfolio looking like Noah’s Ark — a little bit of everything, you’ll have a highly concentrated portfolio of Queen Marys.
This is how the big money is made in the stock market — focusing on a few outstanding opportunities and investing with conviction.
Regards, 
Charles Mizrahi
Founder, Alpha Investor
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