Too Much of Anything Including Diversification is Bad
Diversification is like ice cream: most people would agree that both diversification and ice cream are "good" things. This doesn't mean you can't have too much of a good thing. Eat too much ice cream and you'll end up with a stomach ache. The common consensus is that a well-balanced portfolio with approximately 20 stocks diversifies away the maximum amount of market risk. Owning additional stocks takes away the potential of big gainers significantly impacting your bottom line, as is the case with large mutual funds investing in hundreds of stocks. We leave you with the sage words of the "Oracle of Omaha", Warren Buffett: "wide diversification is only required when investors do not understand what they are doing".