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10 Stocks Reduces Risk by 80% in Asia

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10 Stocks Reduces Risk by 80% in Asia - #Diversification #ChartOfTheDay

 

  • Diversification is the benefit in risk reduction you get from adding additional stocks to your portfolio
  • In Asia, having five stocks in your portfolio reduces risk by 65% compared to holding only one stock
  • At 10 stocks you have reduced risk by 80% and with 20 stocks in your portfolio you have diversified away 90% of company-specific risk
  • Adding more than 30 stocks to your portfolio gives limited additional benefits. Diversification follows the law of diminishing returns

 

Full paper available for free at SSRN.

 

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Posted in Chart of the Day