This is a question I get a lot, and it usually comes from people who are already well diversified and still feel unsure.
For a long time, most investors were taught some version of modern portfolio theory. Spread your money across asset classes. Own a lot of different names. Reduce risk through diversification. Conceptually, that makes sense.
But over time, research and real-world experience have taught us something important. There is a point where adding more holdings stops helping you.
From a risk standpoint, most of the benefit of diversification shows up early. Once you get into the range of roughly 25 to 35 well-chosen holdings, you’ve already captured most of that benefit.
Beyond that, the math starts to work against you.
When you add a 36th holding, then a 50th, then a 100th, you’re not meaningfully reducing risk anymore. In fact, each additional holding can slightly increase risk, without increasing expected return. You’re adding complexity, but you’re not being compensated for it.
A portfolio with 150 holdings or even 1,000 holdings might not be meaningfully safer than a portfolio with 30. But every additional position adds another variable to manage, another decision point, and another place where performance can drag.
At that point, diversification starts to look more like dilution.
What matters more than the sheer number of holdings is where those holdings are positioned and why they’re there. A smaller portfolio that is intentionally constructed and regularly reviewed can be more efficient than a very large one that simply owns everything.
This doesn’t mean concentration for the sake of concentration. It means being thoughtful.
When holdings are tactically positioned in areas where we believe performance will be stronger, and when risk is measured across the portfolio as a whole, you can often achieve a better balance of risk and return with fewer moving parts.
The goal is not to own as much as possible. The goal is to own what makes sense.
If adding another investment does not reduce risk or increase return, then the question becomes simple. Why own it at all?
A well-structured portfolio should be understandable. You should be able to explain why each piece is there and what role it plays. If the portfolio is so large that no one can clearly explain it, that’s usually a sign that complexity has replaced intention.
At the end of the day, investing is about efficiency. Taking risk when it is likely to be rewarded, and avoiding risk when it is not. More holdings do not automatically mean better outcomes.
Sometimes, less really is more.