--- title: Here's How Many Stocks You Should Have in Your Portfolio description: If you're new to investing, you might not own as many stocks as you should. Here's how many you need to have a well-diversified portfolio. authors: - name: Mallika Mitra role: Contributing Editor url: https://money.com/author/mallika-mitra/ bio: Mallika Mitra is a contributing editor for Money, based in Chicago. She has covered investing and retirement for seven years and her work has appeared in CNBC, Bloomberg, Kiplinger, AARP, Barron’s, Bankrate, The Daily Upside, ETF.com, The Bond Buyer, PLANADVISER, PLANSPONSOR and Investopedia. education: Craig Newmark Graduate School of Journalism at CUNY Kalamazoo College at_money_since: 2020 articles: 395 covers: - Investing - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - CNBC - Bloomberg - Kiplinger - Barron's - Bankrate - WGN-TV - CBS News Radio - This Morning With Gordon Deal - Everyone's Talkin' Money social: - https://twitter.com/mitra_mallika - https://www.linkedin.com/in/mallika-mitra-4577a386/ published: '2021-06-16T20:22:45.000Z' modified: '2023-11-14T19:35:16.000Z' section: Investing tags: - Guides - SMM21 word_count: 929 canonical: https://money.com/diversification-how-many-stocks/ type: Article source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Here's How Many Stocks You Should Have in Your Portfolio](https://img.money.com/2021/06/Investing-Trading-Stock-Tips-For-Starter.jpg?quality=85&w=1012&h=569&crop=1) If you’re new to investing, you’ve probably heard of diversification — but building a truly diversified portfolio takes a lot of work. Millions of investors [jumped into the stock market](https://money.com/online-stock-trading-market-price/) during the pandemic, as [meme stocks](https://money.com/meme-stock-amc-gamestop-hertz/) and [cryptocurrency](https://money.com/what-is-bitcoin/) dominated Wall Street’s news cycle and [FOMO](https://money.com/bitcoin-stocks-when-to-sell/) took over. But if you opened an account on a trading platform like [Robinhood](https://money.com/how-to-use-robinhood-beginners/) just to buy an Apple stock here and a Starbucks stock there, chances are you’re not setting yourself up for success. "Sometimes people buy stocks because they heard about them from friends or they’re bored and it turns into sort of like a hobby,” says Amy Arnott, a portfolio strategist at Morningstar. But when you own just a few stocks, you run the risk that one disaster could blow up your whole portfolio, she adds. Evidence suggests many investors may be falling into that trap. The average [Robinhood](https://money.com/pr/p44f1c8c6654?ap_referrer=https%253A%252F%252Fmoney.com%252Fdiversification-how-many-stocks%252F) user only owned two different companies’ stocks or exchange-traded funds, according to [a 2019 analysis of Robinhood account data](https://thenextweb.com/news/data-robinhood-users-are-really-bad-at-portfolio-diversification). (Robinhood has since ceased publishing account data and declined to comment for this story.) Meanwhile Invstr, a commission-free brokerage that also offers financial education, says its investors on average have just four stocks in their accounts. Avoid those mistakes. Here's what you need to know about building a truly diversified stock portfolio. ## Build a balanced portfolio with Robinhood ### Invest in stocks, options, and ETFs at your pace and commission-free. Click on your state to get started. [Start Investing](https://money.com/pr/w534f64483f7?ap_referrer=%2Fdiversification-how-many-stocks%2F) ## The benefits of diversification When you invest, you could face two types of risk: market risk and firm-specific risk. Market risk is inevitable — the market will move and there’s a chance you’ll lose money. Firm-specific risk, however, refers to the uncertainty of a specific area of the market or even a specific stock, and diversification can help you lower that risk. “Not every stock will be subject to the same factors or move in the same direction everyday,” Arnott says. “Usually by increasing the number of stocks, you can lower the portfolio’s risk profile to a certain extent.” About 39% of all U.S. stocks have had 3-month losses of 50% or more, but less than 1% of all diversified U.S. equity funds have had losses that severe, according to data from Morningstar. ## Want to see your investments grow? Robo-advisors can make it happen. ### If you have ambitious goals with your investments but need to be smart about the risks, a robo-adviser can make practical recommendations. To find out more, click below. [Get Started](https://money.com/pr/ufe2777bc64e?ap_referrer=%2Fdiversification-how-many-stocks%2F) ## How many stocks you need to own to build a diversified portfolio The stock market is anything but predictable, so it’s hard to determine exactly how many stocks will give you enough diversification to weather the storm of volatility. But experts have done their best to get a good estimate. In 1970, academics Lawrence Fisher and James Lorie published [their findings](https://www.jstor.org/stable/2352105?seq=1) that a portfolio of around 30 stocks can provide enough diversification to limit risk while still raking in returns. And in the book “Investment Analysis and Portfolio Management,” Frank Reilly and Keith Brown [wrote](https://news.morningstar.com/classroom2/course.asp?docId=145385&page=4) that owning about 12 to 18 stocks will give you more than 90% of the benefits of diversification. The sweet spot may be somewhere in the middle. Haran Segram, a clinical assistant professor of finance at the NYU’s Stern School of Business, says between 20 and 25 stocks are needed for a diversified portfolio. Anything above 25 will only offer marginal benefits, he adds. At least 20 individual stocks is a good rule, and you want to make sure you never allocate more than 5% of your portfolio to any one stock, Arnott adds. ## Discover the app that is changing how people invest in 2026 ### Follow other investors, discover companies to believe in, invest with any amount of money. [View App Details](https://money.com/pr/ucd980863e79?ap_referrer=%2Fdiversification-how-many-stocks%2F) ETFs, treasuries, crypto and alts are available to US members only. Stocks and ETFs are through Open to the Public Investing, member FINRA & SIPC. Full disclosures for other providers at [public.com/#disclosures-main](public.com/#disclosures-main) . ## What stocks to buy for a diversified portfolio It’s not just about how many stocks you have in your portfolio, but which stocks you have. If somebody were to put 20 to 25 stocks in financial services only, for example, that is not diversification, Segram says. They need to make sure those stocks cover at least seven to eight sectors. But picking individual stocks is a lot of work. Unless you’re an active investor who can successfully trade in and out of popular stocks — which is [very hard to do](https://money.com/how-to-find-the-next-meme-stock/) — you’ll want to go for companies that have a long, healthy future. Determining that means digging through their financials, checking up on their revenue and cash flow and analyzing their underlying fundamentals. “It takes more time, more commitment,” Segram says. “It cannot be a hobby or a part-time thing I do when I have 10 minutes.” On top of diversification across different industries, investors also need to think about investing in companies of different sizes, and foreign companies as well as domestic. You also want to make sure not all the stocks in your portfolio have similar traits. For example, if you only have meme stocks in your portfolio, they may move as a group. If you own specific stocks but don't cover all the bases of a well-diversified portfolio, you can fill in the gaps with funds. Say you have a portfolio with large-cap stocks, like Microsoft and Facebook. You can round out your holdings with a small cap index fund, an international index fund or alternative investments like real estate investment trusts (REITs), says Leon LaBrecque, chief growth officer and financial advisor at Sequoia Financial Group. ([Index funds](https://money.com/how-to-invest-in-index-funds/) track a specific group of securities, like the S&P 500.) You can also cover more sectors this way. If you own bank stocks like Bank of America, for example, you could add sector ETFs to your portfolio, like energy or health care funds. Consider the [Select Sector SPDR ETFs](https://www.sectorspdr.com/sectorspdr/), index funds for each of the S&P 500's 11 sectors. 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