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Over-Diversification: How Much Is Too Much?

By Matthew DiLallo – Updated Jun 9, 2025 at 12:08AM

Key Points

  • Diversification lowers risk but can dilute returns beyond an optimal investment number.
  • Over-diversification makes managing investments unwieldy, potentially neglecting lucrative stocks.
  • To avoid over-diversification, limit portfolio to high-conviction investments in different sectors.

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