00:00A diversified portfolio typically requires 20 to 30 stocks to eliminate most unsystematic,
00:06company-specific, risk based on classic finance research by Evans and Archer, 1968, and later
00:13studies. Beyond this range, additional stocks add minimal risk reduction while increasing complexity
00:19and tracking difficulty. 1. 10 to 15 stocks reduces roughly 80 to 85 percent of diversifiable risk,
00:27suitable only for highly engaged individual investors willing to monitor positions closely,
00:33but still leaves meaningful volatility from sector concentration.
00:372. 20 to 30 stocks captures approximately 90 to 95 percent of achievable diversification benefit
00:44within a single market, e.g. U.S. equities. This is the commonly cited sweet spot for retail investors
00:52managing their own portfolios. 3. 50-plus stocks. Marginal risk reduction becomes negligible,
00:59often under 1 to 2 percent additional variance reduction, unless spread across multiple asset
01:04classes, geographies, or sectors, diminishing returns set in sharply after 30.
01:104. 100-plus stocks or index funds. Achieves near-market-level diversification instantly,
01:17appropriate for passive investors, since a single broad-market ETF, e.g., tracking the S&P 500
01:24or MSEI world, already holds 500-plus or 1, 500-plus constituents respectively.
01:31The right number changes with context. Institutional investors or those using leverage need more names
01:37due to larger capital and liquidity constraints. Investors in volatile or emerging markets often need
01:43more stocks, 30-40-plus. Because individual company risk is higher, sector-concentrated portfolios,
01:51e.g., only tech, require diversification across industries. Not just more tickers within the same
01:57sector. And short-term traders prioritize liquidity and correlation over strict stock count.
02:03Note that these figures come from older academic studies and market conditions. Correlations between
02:09stocks have shifted, particularly since 2008 and during 2020-2022 volatility. So treat 2020-2022
