There are a number of factors involved in this matter namely education, psychological factors, family pressure etc. No one is wrong or right in this regard and everyone has their own judgment.

The same logic applies to investing as well and here comes the concept of Diversification.

Peter Lynch who said, “Owning stock is like having children, don’t get involved with more than you can handle”.

What Is Diversification?

Diversification implies that instead of putting all your funds in a single security, you should segregate them into a number of securities in order to reduce risk.

Even if one or two of the company goes bankrupt, your portfolio as a whole is not greatly affected. There is a saying- “Never put all your eggs in one basket”.

But there is a very big problem which many of us actually struggle with i.e. how many stocks should we include in our portfolio?

So shall we go for portfolio diversification ( i.e. eggs in many baskets) or concentrating( i.e. eggs in very few baskets) ?

But there is a limit until which it reduces risk and thereafter it becomes constant.

Every person has their own way of thinking and it differs widely.