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Portfolios 109: How Many Investments Should You Have?

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1.
According to some studies, which of the following numbers of stocks in a portfolio would best moderate those stocks' volatility?
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20. Some studies show that stock volatility has risen over the past few decades. This means that 20 stocks would probably mute volatility most effectively.
2.
Which is the most diverse portfolio?
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It depends on what the securities are. A four-security portfolio can be more diverse than a 10-security portfolio if that 10-security portfolio consists solely of one type of investment--say, technology stocks, or small-company funds--and the four-security portfolio includes a variety of investments.
3.
When it comes to building a diversified portfolio, which is the most important?
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How diverse your securities are. The types of securities you own are almost always more important than how many.
4.
Studies in the past have shown that you should own between 10 and 30 stocks in order to get an optimal stock portfolio.
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True. This number should not be seen as steadfast however, since these studies have used random portfolios.
5.
Studies in the past have shown that you should own how many stocks?
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10 to 30. However, given that investing isn't random (and these studies used random portfolios) and that individual stocks are becoming more volatile, it likely takes more than 30 stocks to create the optimal stock portfolio.