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How Many Stocks Make a Diversified Portfolio?

1987; Cambridge University Press; Volume: 22; Issue: 3 Linguagem: Inglês

10.2307/2330969

1756-6916

Meir Statman,

Housing Market and Economics

We show that a well-diversified portfolio of randomly chosen stocks must include at least 30 stocks for a borrowing investor and 40 stocks for a lending investor. This contradicts the widely accepted notion that the benefits of diversification are virtually exhausted when a portfolio contains approximately 10 stocks. We also contrast our result with the levels of diversification found in studies of individuals' portfolios.