A research consensus going back to the 1970s says the marginal diversification benefit of adding a new stock collapses fast. The first 5–10 holdings cut your portfolio's volatility sharply versus owning just one. The next 5–10 keep cutting it, but slower. Past 20 holdings you're mostly adding tracking work without meaningfully reducing risk. The reason: stocks within the same market move together more than they move apart, so adding a 21st US large-cap stock to a 20-stock US large-cap portfolio is closer to duplication than diversification. The practical takeaway for a retail investor is that 8 to 15 holdings is the sweet spot — enough to absorb the failure of any single name, few enough that you can actually understand what you own.

“After about 20 stocks, you've reached the point where new holdings buy you almost no new diversification — only more positions to track.”