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

Question

Quizplus · Accepted Answer

According to modern portfolio theory, diversification can provide significant benefits in reducing risk and increasing returns up to a certain point. This point is generally reached when a portfolio has around 20-30 stocks, as adding more securities beyond this point results in diminishing marginal benefits. Therefore, the best choice is C because most of the beneficial effects of diversification will have been received when a portfolio of common stocks contains approximately 20 stocks.

Most of the Beneficial Effects of Diversification Will Have Been