Over-Diversifying?

Physician's Money Digest, June15 2004, Volume 11, Issue 11

When you diversify among assetclasses (eg, stocks, bonds, cash, and realestate), that's a good thing. If you diversifytoo much in any one asset class,however, that's a different story. Manymarket mavens say your stock holdingsshould be split between large and smallcaps, but if you have a tendency to buystocks on impulse, your portfolio couldcome to look like your average indexfund. A portfolio of individual stocksshould have about 20 to 25 stocks indifferent market segments, the sagessay. Any more than that and you're reallyoperating a miniature index fund,which you can get a lot cheaper by actuallybuying into one, like the Vanguard500 fund (www.vanguard.com).