What Advice Would You Give for Diversifying An Investment Portfolio?

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There is such a thing as being overly diversified. When people think of diversification, they often consider an index fund, which holds hundreds of different stocks. Diversifying over more stocks lowers risk, but it also lowers the performance potential. At any given time, there may be only a few dozen outstanding stocks. To diversify into hundreds reduces exposure to the stocks that are driving market indices higher. From a statistical perspective, assuming investments are uncorrelated, 20-30 different holdings is plenty to realistically diversify against catastrophic risks.