According to empirical evidence, how many stocks are generally recommended to effectively diversify a portfolio?

To effectively diversify a portfolio and reduce unsystematic risk, empirical evidence suggests that holding about 15 to 30 stocks is generally recommended. This range allows for a significant level of diversification, as it can adequately spread risk across different sectors and industries, thus minimizing the impact of any single stock's poor performance on the overall portfolio.

Holding around 15 to 30 stocks also typically balances the marginal benefits of diversification with the costs associated with buying and managing those securities. Fewer stocks might not provide enough diversification to mitigate risks effectively, while holding more than 30 stocks often results in diminishing returns on the benefits of diversification, as the effects of additional stocks on reducing risk become less significant. Therefore, this recommended range ensures enough diversification to promote a more stable investment return while being manageable for investors.