1

I have read an article in morningstar telling that Euro Stoxx 50 provides a good degree of diversification. This surprises me, my understanding is that the S&P 500 is well diversified, how can an index with only 50 companies be considered as well diversified?

  • 2
    I'm not sure I understand. I don't think "a good degree of diversification" is meant to imply "as well diversified as the S&P 500". – glibdud Feb 10 at 0:10
2

Diversification means having a variety of investments in a portfolio. Varies studies have suggested that for stocks, 25 or so of them achieves that.

An investment in the Euro Stoxx 50 would certainly achieve a good degree of diversification. An investment in the S&P 500 would provide far more than that.

| improve this answer | |
2

As the other answer has pointed out if you hold direct shares about 25 is enough, which prevents a huge loss if one company goes under and it minmizes the costs associated with buying and selling. The more stocks you hold the more overheads you have, not only that you have to track the performance and dealings of many more companies. So 50 is more than enough for even billionaires

| improve this answer | |

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.