How Many Stocks Make a Diversified Portfolio?

Meir Statman

Journal of Financial and Quantitative Analysis, 1987, vol. 22, issue 3, 353-363

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.

Date: 1987
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