What are the risks of over-diversification in investing?

What are the risks of over-diversification in investing?

Over-diversification can lead to diminished returns, as spreading investments too thin may dilute potential gains.

Can you explain how it affects my portfolio performance?

Certainly! When you over-diversify, the performance of your portfolio may mirror the market, reducing the impact of high-performing assets.

Is there a specific number of investments I should aim for?

While there's no one-size-fits-all answer, many experts suggest having between 15 to 30 investments to balance risk and reward.

What are some signs that I might be over-diversified?

Signs include having too many similar assets, low overall returns, and difficulty in managing your portfolio effectively.

How can I effectively manage my investments to avoid this?

Focus on quality over quantity, regularly review your portfolio, and consider using a mix of asset classes to maintain balance.