Most of the beneficial effects of diversification will have been received by the time a portfolio of common stocks contains _____ stocks.
A) 2
B) 5
C) 20
D) 50

Question

Quizplus · Accepted Answer

According to modern portfolio theory, the benefits of diversification are maximized when a portfolio contains between 20 to 30 individual stocks from different industries and sectors. Adding additional stocks beyond this point may not provide significant benefits in terms of reducing portfolio risk. Therefore, the most beneficial effects of diversification will have been received by the time a portfolio of common stocks contains 20 stocks.

Most of the Beneficial Effects of Diversification Will Have Been