portfolio has a higher expected return.

Amount of diversification

There is no magic number of stocks that is diversified versus not. Sometimes quoted is 30, although it can be as low as 10 provided they are carefully chosen. A 1985 book reported that most value from diversification comes from the first 15 or 20 different stocks in a portfolio. More stocks give lower price volatility.

Given the advantages of diversification, many experts recommend maximum diversification, also known as "buying the market portfolio".

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