There are very few good ideas in any given year--Warren Buffett has said he's happy to have even one. For the rest of us (i.e., those without the need to invest several billion dollars to make a difference in their portfolios), there may be five or six good ideas a year. In any event, if you feel the need to hold more than 20 stocks, you probably aren't using the fat-pitch approach--more than likely you're speculating and trying to diversify away the risks of your speculations by holding lots of different names. Remember, it takes great patience to be a fat-pitch investor, but when opportunities present themselves (nice fat pitches right down the middle), you should buy boldly (swing away).

We caution you, however, that it's risky to hold a concentrated portfolio (few positions) unless you do three things:

1. Buy only wide-moat companies, which will increase in intrinsic value over time.
2. Buy them only at a significant discount to fair value (a margin of safety).
3. Have a time horizon of at least three years on each pick you make. It may take this long (or longer) for the market to recognize the value of a company.

If you aren't willing to follow these three rules on each and every stock you buy, then you probably need more diversification in your portfolio. (We'll talk much more about portfolio construction in Lesson 501.)

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