- 2 stocks eliminates 46% of non-market risk of just owning one stock
- 4 stocks eliminates 72% of the risk
- 8 stocks eliminates 81% of the risk
- 16 stocks eliminates 93% of the risk
- 32 stocks eliminates 96% of the risk
- 500 stocks eliminates 99% of the risk
What does Japan Quake tell you something on risk management on your portfolio?
No matter how good you are with your TA or FA or both. You still must at all times protect your portfolio against Black Swan event that may happen and causing big losses to the portfolio. It is lot harder to recover from big losses in the portfolio.
In Joel Greenblatt's brilliant book, "You Can Be a Stock Market Genius", he provides the following statistics by owning the following number of stocks: