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Each person has there own way of investing that they feel comfortable with....Now you may wish to do your own research, but let us take a person who has 21 stocks in their portfolio or use one of the listed funds.

If you look through the portfolio ( medium to long term) you will find on average that  7 will be going up, 7 will be going sideways and 7 will be going down. In a fund 33% up,33% sideways and 33% down.

So by being over diversified you have 14 stocks at present doing nothing for you except maybe a dividend.

Most have this many shares because they do not have the confidence in there ability or think they have  less chance of losing there money overall (a little bit in each basket).

Another investor may have his money in the 7 that are already moving in the right direction and he has the other 14 on his watch list ready for investment when the stocks eventually show signs of moving in the right direction and not just going sideways. I would think trying to stay on top of this many share would take a lot of work.......

It does not matter if you miss out on the first 10% of a move as long as you pick up the next 80%

I try to keep to the rules below as best as possible.

Rule 1:

Irrespective of the amount of money you have invest, you should take the same amount of time researching your options to ensure you are protecting your capital on each and every occasion.

Rule 2:

You should always aim to have between 5 and 12 stocks in your portfolio, although for traders it should be closer to 5.The trick is not to have lots of stocks with small amounts invested in each. Instead, you only require a small number of the right stocks with larger amounts invested in each. This actually lessens your risk and increases your returns because:

* Smaller portfolios are easier to manage and represent lower risk. The more stocks you have in your portfolio the more work you have to do to manage your risk level.

* It is far easier to select a smaller number of stocks that are rising in price. Therefore, the result is increased returns.

* You will have less transaction costs in buying  and selling stocks simply because a smaller portfolio will have fewer transactions.

Rule 3:

When you purchase stocks never invest more than 20% of your capital in any one stock. If you invest in the share market you need to accept that some stocks will fall in value, However this rule will help reduce your exposure to risk, while allowing you to achieve good returns simply because you are minimising the amount of capital you could lose at any one time.

http://www.investopedia.com/ask/answers/09/systemic-systematic-risk.asp?lgl=rira-baseline-vertical