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How Many Stocks Make a Diversified Portfolio?

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  • Statman, Meir

Abstract

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.

Suggested Citation

  • Statman, Meir, 1987. "How Many Stocks Make a Diversified Portfolio?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(3), pages 353-363, September.
    • Handle: RePEc:cup:jfinqa:v:22:y:1987:i:03:p:353-363_01
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    References listed on IDEAS

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