Does owning more stocks mean you are diversified?
Understand overlapping risks, portfolio weights and rebalancing.
Look beyond the number of holdings
Diversification spreads money across investments to reduce dependence on a particular company or sector. Holdings that move together can fall together. A large holding count alone does not establish that a portfolio is well diversified.
A simple two-asset example
Assume KRW 5 million in A and KRW 5 million in B. If A falls 20% while B rises 10%, their values become KRW 4 million and KRW 5.5 million. The portfolio totals KRW 9.5 million, a 5% loss; holding A alone would have lost 20%.
That outcome depends on the assumed rise in B. If both assets fall 20%, the diversified portfolio also loses 20%. Diversification does not guarantee profits or prevent every market loss.
Multiple ETFs can still overlap
Funds with similar top holdings or a narrow sector focus can overlap despite different names. Review holdings, sector weights, countries, currencies and any leverage. Owning multiple stocks does not eliminate broad market risk.
Rebalancing restores intended weights
Starting with KRW 5 million in each asset, a 20% rise in A alone leaves KRW 6 million and KRW 5 million. A now represents about 54.55%. In this example, adding KRW 1 million to B restores equal weights. Rebalancing through sales can create fees or tax.
The 50/50 split is only an illustration, not a recommended allocation. Consider goals, time horizon and ability to absorb losses before reviewing weights. This site's personality quiz does not replace that assessment.
Sources and calculation assumptions
All figures are illustrative assumptions, not actual product returns or market quotes. Worked examples were calculated independently by Doug editorial.