{"id":1994,"date":"2026-06-10T07:58:17","date_gmt":"2026-06-10T07:58:17","guid":{"rendered":"https:\/\/www.bearsavings.com\/blog\/?p=1994"},"modified":"2026-06-10T07:58:19","modified_gmt":"2026-06-10T07:58:19","slug":"over-diversification-in-investing","status":"publish","type":"post","link":"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/","title":{"rendered":"Over Diversification in Investing: Why Too Many Stocks Can Be a Costly Mistake"},"content":{"rendered":"<div style=\"margin-top: 0px; margin-bottom: 0px;\" class=\"sharethis-inline-share-buttons\" ><\/div>\n<p class=\"wp-block-paragraph\">Something that pretty much every investor learns on day one of investing is this:<br><strong>&#8220;Diversification is the only free lunch in investing.&#8221;<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But investors often take this advice too far.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Instead of owning enough stocks to decrease their risk, they end up copying an index fund. They hold so many stocks that their investments are diluted. On top of that, they spend hours doing research, reading earnings reports, monitoring markets\u2026 All to just average out!<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is called over diversification, and it can be incredibly detrimental to you if you\u2019re just starting out with growth investing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In this post, I want to cover why over diversification caps your wealth-building potential. How many stocks is enough anyways? And why some of the best investors in the world practice concentration.<\/p>\n\n\n<div style=\"max-width: -moz-fit-content\" class=\"wp-block-ub-table-of-contents-block ub_table-of-contents ub_table-of-contents-collapsed\" id=\"ub_table-of-contents-1329a767-f20d-4742-8d36-66a9a21d0aae\" data-linktodivider=\"false\" data-showtext=\"show\" data-hidetext=\"hide\" data-scrolltype=\"auto\" data-enablesmoothscroll=\"false\" data-initiallyhideonmobile=\"false\" data-initiallyshow=\"false\"><div class=\"ub_table-of-contents-header-container\" style=\"\">\n\t\t\t<div class=\"ub_table-of-contents-header\" style=\"text-align: left; \">\n\t\t\t\t<div class=\"ub_table-of-contents-title\" style=\"\"><strong>Table of Contents<\/strong><\/div>\n\t\t\t\t<div class=\"ub_table-of-contents-header-toggle\">\n\t\t\t<div class=\"ub_table-of-contents-toggle\" style=\"\">\n\t\t\t\u00a0[<a class=\"ub_table-of-contents-toggle-link\" href=\"#\" style=\"\">show<\/a>]\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div><div class=\"ub_table-of-contents-extra-container\" style=\"\">\n\t\t\t<div class=\"ub_table-of-contents-container ub_table-of-contents-1-column ub-hide\">\n\t\t\t\t<ul style=\"\"><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#0-what-is-over-diversification\" style=\"\">What Is Over Diversification?<\/a><\/li><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#1-why-new-investors-often-over-diversify\" style=\"\">Why New Investors Often Over Diversify<\/a><\/li><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#2-the-real-risk-is-not-volatility\" style=\"\">The Real Risk Is Not Volatility<\/a><\/li><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#3-warren-buffetts-view-on-diversification\" style=\"\">Warren Buffett&#8217;s View on Diversification<\/a><\/li><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#4-why-growth-investors-should-avoid-excessive-diversification\" style=\"\">Why Growth Investors Should Avoid Excessive Diversification<\/a><\/li><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#5-the-math-behind-over-diversification\" style=\"\">The Math Behind Over Diversification<\/a><\/li><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#6-the-time-problem-nobody-talks-about\" style=\"\">The Time Problem Nobody Talks About<\/a><\/li><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#7-how-many-stocks-do-you-actually-need\" style=\"\">How Many Stocks Do You Actually Need?<\/a><\/li><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#8-when-diversification-makes-sense\" style=\"\">When Diversification Makes Sense<\/a><\/li><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#9-a-better-framework-for-growth-investors\" style=\"\">A Better Framework for Growth Investors<\/a><\/li><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#10-the-biggest-mistake-diversifying-away-your-best-ideas\" style=\"\">The Biggest Mistake: Diversifying Away Your Best Ideas<\/a><\/li><li style=\"\"><a href=\"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/#11-final-thoughts\" style=\"\">Final Thoughts<\/a><\/li><\/ul>\n\t\t\t<\/div>\n\t\t<\/div><\/div>\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2026\/06\/over-diversification-is-bad-1024x683.jpg\" alt=\"Illustration of an investor standing at a crossroads between an overcrowded portfolio path filled with countless investment options and a focused growth investing path featuring a small number of high-conviction stocks and an upward trend.\" class=\"wp-image-1995\" srcset=\"https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2026\/06\/over-diversification-is-bad-1024x683.jpg 1024w, https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2026\/06\/over-diversification-is-bad-300x200.jpg 300w, https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2026\/06\/over-diversification-is-bad-768x512.jpg 768w, https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2026\/06\/over-diversification-is-bad-432x288.jpg 432w, https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2026\/06\/over-diversification-is-bad.jpg 1536w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">A visual representation of over diversification versus concentrated investing, showing how focusing on a few high-quality businesses can potentially lead to stronger long-term returns than owning too many positions.<\/figcaption><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"0-what-is-over-diversification\" class=\"wp-block-heading\">What Is Over Diversification?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Over diversification is when you have so many positions in your portfolio that adding more reduces very little risk but continues to water down returns.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Investor A has 8 growth stocks he researched himself.<\/li>\n\n\n\n<li>Investor B has 55 stocks from all different sectors.Who will win the portfolio race?<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Most of the time investor A.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Why\u2019s that?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investor B cuts his winners so small they don\u2019t significantly impact his overall portfolio.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Picture yourself finding a ten-bagger stock.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If that stock is 1% of your portfolio a 10x return only moves your portfolio performance by about 9%.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Isn\u2019t exactly life changing is it?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But what if that ten-bagger was 15% of your portfolio? Boom. Over diversification is attacking you.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"1-why-new-investors-often-over-diversify\" class=\"wp-block-heading\">Why New Investors Often Over Diversify<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Lots of new investors mistake diversification for safety.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">They think:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>More stocks = safer<\/li>\n\n\n\n<li>More sectors = safer<\/li>\n\n\n\n<li>More countries = safer<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">So they continually open new positions when they have extra cash.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Pretty soon their portfolio looks like\u2026<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>3 AI stocks<\/li>\n\n\n\n<li>4 semiconductor stocks<\/li>\n\n\n\n<li>2 banks<\/li>\n\n\n\n<li>3 healthcare stocks<\/li>\n\n\n\n<li>5 REITs<\/li>\n\n\n\n<li>4 consumer companies<\/li>\n\n\n\n<li>6 ETFs<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">A few speculative positions<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Before they know it, they have 30-50 positions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">By that time, it\u2019s hard to keep up with all the companies.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Even worse, they know little about most of them.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"2-the-real-risk-is-not-volatility\" class=\"wp-block-heading\">The Real Risk Is Not Volatility<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Risk is defined by many investors as price swings.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Risk is defined by smart investors differently.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Risk is:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>losing part of your capital forever<\/li>\n\n\n\n<li>owning companies you don\u2019t understand<\/li>\n\n\n\n<li>overpaying for growth<\/li>\n\n\n\n<li>buying the hype story instead of a fundamentals story<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">A portfolio of 50 companies you don\u2019t understand may not be less risky than a portfolio of 10 companies you understand very well.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It could be FAR MORE RISKY.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you can\u2019t explain to yourself:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>how the company makes money<\/li>\n\n\n\n<li>why it will continue to make money<\/li>\n\n\n\n<li>what\u2019s driving revenue growth<\/li>\n\n\n\n<li>what\u2019s the outlook for the industry<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">then owning more of that nonsense won\u2019t decrease your risk.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It will increase your risk.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"3-warren-buffetts-view-on-diversification\" class=\"wp-block-heading\">Warren Buffett&#8217;s View on Diversification<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Warren Buffett is one of the few investors who likes to talk about diversification\u2026A lot.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here\u2019s one of his favorite quotes on the topic:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">\u201cThe rule about not putting all your eggs in one basket is great advice\u2014unless you know for certain that one basket will win and others will lose. Diversification is protection against ignorance.\u201d<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">Although Buffett sees value in diversification for the average investor, he also feels if investors understand a business they can take advantage of concentration.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you look back at Berkshire Hathaway\u2019s biggest winners over the years you will notice many of them were concentrated positions like:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Apple Inc.<\/li>\n\n\n\n<li>Coca-Cola<\/li>\n\n\n\n<li>American Express<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">These stocks became large enough to move the needle for Buffett because they were concentrated positions in his portfolio.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"4-why-growth-investors-should-avoid-excessive-diversification\" class=\"wp-block-heading\">Why Growth Investors Should Avoid Excessive Diversification<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Growth Investing is NOT Index Investing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>You Don\u2019t Want To Own Every Company.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You want to own exceptional businesses That can return multiples.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Think\u2026.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>AI<\/li>\n\n\n\n<li>Cloud<\/li>\n\n\n\n<li>Robotics<\/li>\n\n\n\n<li>Space<\/li>\n\n\n\n<li>Driverless<\/li>\n\n\n\n<li>Semiconductors<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Time after time over history\u2026.the majority of wealth created in the stock market comes from a small fraction of stocks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Countless studies demonstrate that the majority of stocks underperform market indexes over their life.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Only a few BIG winners drive total market returns.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you have too many losers in your portfolio\u2026.your winners can\u2019t do enough to matter.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"5-the-math-behind-over-diversification\" class=\"wp-block-heading\">The Math Behind Over Diversification<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Let\u2019s look at two portfolios.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Portfolio A<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>10 stocks<\/li>\n\n\n\n<li>All equal weighting<\/li>\n\n\n\n<li>10% in each position<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">A single stock turns into a 10-bagger.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Impact: 10% x 10 = 100%<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Remember this portfolio only has ten stocks. One big winner can double your money!<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Portfolio B<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>50 stocks<\/li>\n\n\n\n<li>All equal weighting<\/li>\n\n\n\n<li>2% in each position<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">A single stock turns into a 10-bagger.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Impact: 2% x 10 = 20%<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Same stock picks. Same results, just diluted.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The investor IDENTIFIED the big winner just like his peer.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Yet his portfolio won\u2019t come close to doubling.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Over diversification is the hidden cost.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"6-the-time-problem-nobody-talks-about\" class=\"wp-block-heading\">The Time Problem Nobody Talks About<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">If you invest in stocks, you have to keep track of them.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You have to follow:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Company earnings reports<\/li>\n\n\n\n<li>Management discussion<\/li>\n\n\n\n<li>Competitors<\/li>\n\n\n\n<li>Industry news<\/li>\n\n\n\n<li>Valuation shifts<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Are you following:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">10 stocks<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">or<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">50 stocks?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The latter will suck up a lot more time.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A lot of investors become \u201cjacks-of-all-trades\u201d and know a little about many companies. Instead of experts on a few.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Often depth of knowledge trumps breadth of knowledge when making investments.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"7-how-many-stocks-do-you-actually-need\" class=\"wp-block-heading\">How Many Stocks Do You Actually Need?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">There isn\u2019t a magic number.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That said, research has shown that you gain most of the diversification benefits after quite a few stocks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Many academic studies have found that owning about 15-25 stocks that are moderately uncorrelated eliminates most company specific risk.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">After that point, there are diminishing returns.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here\u2019s a quick breakdown:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>5\u201310 Stocks<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Ideal for seasoned investors who are highly confident in their picks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>10\u201320 Stocks<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Sweet spot for many active investors.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Allows you to diversify while still maintaining enough capital in positions for movement to matter.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>25+ Stocks<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Tends to start creeping into over-diversification territory.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>50+ Stocks<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Starts to feel like you\u2019re just running your own version of an index fund.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"8-when-diversification-makes-sense\" class=\"wp-block-heading\">When Diversification Makes Sense<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Again, this article is not saying you should avoid diversification altogether.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">I believe diversification is smart if:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>You\u2019re a Beginner<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">New investors are still developing their business analysis skills. Broad diversification can help hedge your errors.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>You Don\u2019t Have Time<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you don\u2019t have the time to research companies, then ETFs might be a better route.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>You\u2019re Close to Retirement<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When you\u2019re close to retirement you care more about preserving your capital than growing it as much as possible. So diversification can help reduce your risks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>You Like Passive Investing<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Index funds are still one of the best wealth creation tools for the average investor.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The real difference is knowing if you\u2019re trying to:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Track the market Returns that match the overall market.<\/li>\n\n\n\n<li>Beat the market Returns that exceed the overall market.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Your strategy should reflect which you\u2019re trying to do.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"9-a-better-framework-for-growth-investors\" class=\"wp-block-heading\">A Better Framework for Growth Investors<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Rather than asking yourself:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cHow many stocks should I own?\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Ask yourself:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">\u201cHow many companies can I truly understand?\u201d<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">For most people, the answer is shockingly few.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A realistic portfolio may look like:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Core Positions (60%\u201380%)<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Your best ideas, ones you have the highest conviction in.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Examples:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>AI infrastructure<\/li>\n\n\n\n<li>Mega\/near-mega software companies<\/li>\n\n\n\n<li>High quality compounders<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Satellite Positions (20%\u201340%)<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Smaller speculative bets.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Examples:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Emerging technologies<\/li>\n\n\n\n<li>Turnarounds<\/li>\n\n\n\n<li>Early stage growth companies<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">This allows your winners to move the needle on your returns while still being sufficiently diversified.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"10-the-biggest-mistake-diversifying-away-your-best-ideas\" class=\"wp-block-heading\">The Biggest Mistake: Diversifying Away Your Best Ideas<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Among the most frequent investing errors is discovering a great company and then not investing enough money to it.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Entrepreneurs sweat for months over:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Revenue growth<\/li>\n\n\n\n<li>Margins<\/li>\n\n\n\n<li>Management<\/li>\n\n\n\n<li>Competitive advantages<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">And then only invest 1% of their portfolio. If conviction is that high, scale should follow.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Conviction, of course, needs to be deserved. It\u2019s earned by doing your homework, not by following your heart.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But by watering down every idea by the same amount, investors water down their best ideas too.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 id=\"11-final-thoughts\" class=\"wp-block-heading\">Final Thoughts<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Diversification is good.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Too much diversification is bad.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019re early in your growth investing career, you should be focused on learning, building conviction, and finding great businesses.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">40, 50, 60 stocks might make you feel safe, but you\u2019ll likely end up just mediocre. You\u2019ll spread yourself too thin. You won\u2019t be able to really know your companies. You\u2019ll have fewer big winners.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Warren Buffett didn\u2019t become wealthy by owning everything.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">He became wealthy by finding a few winners and letting them compound.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Most people won\u2019t be able to beat a well researched portfolio of 10-20 stocks they\u2019re high conviction on by having dozens of positions they can\u2019t follow.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Remember..<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Diversification lets you be wrong<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Concentration lets you be right<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You just have to know which you are.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Something that pretty much every investor learns on day one of investing is this:&#8220;Diversification is the only free&#8230;<\/p>\n","protected":false},"author":1,"featured_media":1995,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[40],"tags":[],"class_list":["post-1994","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","article","has-background","has-excerpt","has-avatar","has-author","has-date","has-comment-count","has-category-meta","has-read-more","has-post-media","thumbnail-"],"aioseo_notices":[],"aioseo_head":"\n\t\t<!-- All in One SEO 5.0.1.1 - aioseo.com -->\n\t<meta name=\"description\" content=\"Something that pretty much every investor learns on day one of investing is this:&quot;Diversification is the only free lunch in investing.&quot; But investors often take this advice too far. 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Instead of owning enough stocks to decrease their risk, they end up copying an index fund. They hold so many stocks that their investments are diluted.","og:url":"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/","og:image":"https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2026\/06\/over-diversification-is-bad.jpg","og:image:secure_url":"https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2026\/06\/over-diversification-is-bad.jpg","og:image:width":1536,"og:image:height":1024,"article:published_time":"2026-06-10T07:58:17+00:00","article:modified_time":"2026-06-10T07:58:19+00:00","twitter:card":"summary_large_image","twitter:title":"Over Diversification in Investing: Why Too Many Stocks Can Be a Costly Mistake - BearSavings","twitter:description":"Something that pretty much every investor learns on day one of investing is this:&quot;Diversification is the only free lunch in investing.&quot; But investors often take this advice too far. Instead of owning enough stocks to decrease their risk, they end up copying an index fund. They hold so many stocks that their investments are diluted.","twitter:image":"https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2026\/06\/over-diversification-is-bad.jpg"},"aioseo_meta_data":{"post_id":"1994","title":null,"description":null,"keywords":null,"keyphrases":{"focus":[],"additional":[]},"primary_term":null,"canonical_url":null,"og_title":null,"og_description":null,"og_object_type":"default","og_image_type":"default","og_image_url":null,"og_image_width":null,"og_image_height":null,"og_image_custom_url":null,"og_image_custom_fields":null,"og_video":"","og_custom_url":null,"og_article_section":null,"og_article_tags":null,"twitter_use_og":false,"twitter_card":"default","twitter_image_type":"default","twitter_image_url":null,"twitter_image_custom_url":null,"twitter_image_custom_fields":null,"twitter_title":null,"twitter_description":null,"schema":{"blockGraphs":[],"customGraphs":[],"default":{"data":{"Article":[],"Course":[],"Dataset":[],"FAQPage":[],"Movie":[],"Person":[],"Product":[],"ProductReview":[],"Car":[],"Recipe":[],"Service":[],"SoftwareApplication":[],"WebPage":[]},"graphName":"BlogPosting","isEnabled":true},"graphs":[]},"schema_type":"default","schema_type_options":null,"pillar_content":false,"robots_default":true,"robots_noindex":false,"robots_noarchive":false,"robots_nosnippet":false,"robots_nofollow":false,"robots_noimageindex":false,"robots_noodp":false,"robots_notranslate":false,"robots_max_snippet":"-1","robots_max_videopreview":"-1","robots_max_imagepreview":"large","priority":null,"frequency":"default","local_seo":null,"breadcrumb_settings":null,"limit_modified_date":false,"ai":{"faqs":[],"keyPoints":[],"schemas":[],"titles":[],"descriptions":[],"socialPosts":{"email":[],"linkedin":[],"twitter":[],"facebook":[],"instagram":[]}},"created":"2026-06-10 07:58:01","updated":"2026-09-10 03:09:49","seo_analyzer_scan_date":null,"focus_keyword":null,"additional_keywords":null,"truseo_locale":null},"aioseo_breadcrumb":"<div class=\"aioseo-breadcrumbs\"><span class=\"aioseo-breadcrumb\">\n\t\t\t<a href=\"https:\/\/www.bearsavings.com\/blog\" title=\"Home\">Home<\/a>\n\t\t<\/span><span class=\"aioseo-breadcrumb-separator\">&raquo;<\/span><span class=\"aioseo-breadcrumb\">\n\t\t\t<a href=\"https:\/\/www.bearsavings.com\/blog\/category\/investing\/\" title=\"Investing\">Investing<\/a>\n\t\t<\/span><span class=\"aioseo-breadcrumb-separator\">&raquo;<\/span><span class=\"aioseo-breadcrumb\">\n\t\t\tOver Diversification in Investing: Why Too Many Stocks Can Be a Costly Mistake\n\t\t<\/span><\/div>","aioseo_breadcrumb_json":[{"label":"Home","link":"https:\/\/www.bearsavings.com\/blog"},{"label":"Investing","link":"https:\/\/www.bearsavings.com\/blog\/category\/investing\/"},{"label":"Over Diversification in Investing: Why Too Many Stocks Can Be a Costly Mistake","link":"https:\/\/www.bearsavings.com\/blog\/over-diversification-in-investing\/"}],"featured_image_src":"https:\/\/www.bearsavings.com\/blog\/wp-content\/uploads\/2026\/06\/over-diversification-is-bad.jpg","author_info":{"display_name":"DA","author_link":"https:\/\/www.bearsavings.com\/blog\/author\/derek\/"},"_links":{"self":[{"href":"https:\/\/www.bearsavings.com\/blog\/wp-json\/wp\/v2\/posts\/1994","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bearsavings.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bearsavings.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bearsavings.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bearsavings.com\/blog\/wp-json\/wp\/v2\/comments?post=1994"}],"version-history":[{"count":1,"href":"https:\/\/www.bearsavings.com\/blog\/wp-json\/wp\/v2\/posts\/1994\/revisions"}],"predecessor-version":[{"id":1996,"href":"https:\/\/www.bearsavings.com\/blog\/wp-json\/wp\/v2\/posts\/1994\/revisions\/1996"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bearsavings.com\/blog\/wp-json\/wp\/v2\/media\/1995"}],"wp:attachment":[{"href":"https:\/\/www.bearsavings.com\/blog\/wp-json\/wp\/v2\/media?parent=1994"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bearsavings.com\/blog\/wp-json\/wp\/v2\/categories?post=1994"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bearsavings.com\/blog\/wp-json\/wp\/v2\/tags?post=1994"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}