Can You Be over Diversified?

However, it's possible to have too much diversification. Over-diversification occurs when each incremental investment added to a portfolio lowers the expected return to a greater degree than the associated reduction in the risk profile.

Is it bad to be too diversified?

However, too much diversification, or "diworsification," can be a bad thing. Just like a lumbering corporate conglomerate, owning too many investments can confuse you, increase your investment cost, add layers of required due diligence and lead to below-average risk-adjusted returns.

Is there such thing as over diversification?

Over diversification is possible as some mutual funds have to own so many stocks (due to the large amount of cash they have) that it's difficult to outperform their benchmarks or indexes. Owning more stocks than necessary can take away the impact of large stock gains and limit your upside.