This is probably something that has been argued for the longest time ever – but how many stocks should an investor own?

Should one have a diversified or concentrated portfolio?

This data comes from a famous value investor, Joel Greenblatt’s book, You Can Be A Stock Market Genius. According to Joel Greenblatt’s book, the risk-reduction benefits of adding more stocks to your portfolio significantly decreases once you get to about 20 or so stocks. Whitney Tilson too citing the data, said that “owning two stocks eliminates 46% of non-market risk of just owning one stock.” As you add stocks to the portfolio, that non-market risk declines as such:

• Owning 4 stocks eliminates 72% of the non-market risk

• Owning 8 stocks eliminates 81% of the non-market risk

• Owning 16 stocks eliminates 93% of the non-market risk

• Owning 32 stocks eliminates 96% of the non-market risk

• Owning 500