Tang, 2004 said that

Standard textbooks of Investment/Financial Management teach that although portfolio diversification can help reduce investment risk without sacrificing the expected rate of return, the benefit of diversication is exhausted with a portfolio size of 10–15

I understand that most of the diversifiable risk can be achieved by having from 15-20 stocks in a portfolio. But the word" exhausted" really confused me.

From Cambridge, it is nothing more than a synonym of "very tired"

From Merriam-Webster, it is almost the same with an addition meaning that the benefit of the source being depleted.

I am from a country that English is not the mother language so it is hard for me to understand in this case. I mean, is it the same that we replace the word "exhausted" in Tang,2004 by "greatest"? I mean, the benefit of diversification is at its best in the portfolio of 10-15 stocks?

1 Answer 1


I am not sure why you use "15-20 stocks" in your question when the passage uses "10-15." Those are not the same at all.

Regardless, the meaning is a somewhat metaphorical use of sense 2 at wiktionary:

Depleted of resources.
The exhausted mine was worthless once all the ore had been extracted.

In your passage, the benefit is exhausted means there is no more benefit. That is, diversification provides a benefit until you have 10-15 stocks. Once you have that number of stocks, diversifying more does not give better results.

  • Thanks you for your explanation. I used "stocks" here for the ease of explanation purpose. "Stocks" is also an object that the author mention in his/her paper Nov 11, 2021 at 20:19
  • 1
    I was referring to the number. You said 15-20 but the author said 10-15.
    – randomhead
    Nov 11, 2021 at 20:27
  • edited, thanks :D Nov 11, 2021 at 20:50

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