How to diversify your investment portfolio but not diworisfy
Anyone who starts investing quickly learns the golden rule of building a successful, resilient portfolio: don't put all your eggs in one basket. How more shares cuts risk This chart shows how Elton and Gruber's Risk Reduction and Portfolio Size paper illustrated how holding more shares reduces total risk. In an article published in the Journal of Business in 1977, entitled Risk Reduction and Portfolio Size, they looked at how the number of different shares in a portfolio affected risk. Using data from a sample of 3,290 securities on the New York Stock exchange, they looked at portfolio size from one single share up to 200 different shares and compared it to an equally weighted portfolio of all securities in the population.. Elton & Gruber: Risk Reduction and Portfolio Size The chart and table above, using Elton and Gruber's data, shows how total risk figure drops dramatically as more shares are added up to about ten shares and then starts to decline more slowly.
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