I'm sure this probably comes as no surprise, but research has shown that individual stocks have become more risky over the last several years.

If stocks individually are riskier now than ever before, it implies that diversification across a number of stocks is more necessary now than ever.

Furthermore, the old belief that owning 10-15 stocks to be properly diversified may need to be reexamined in light of the increased risk of individual stocks.

I have to admit that I've never been a fan of having 60 stocks in a portfolio. For one, many stocks are hard to follow both from an investment standpoint as well as a record-keeping standpoint. Furthermore, most investors don't have 60 great investment ideas, so holding that many stocks tends to water down your best ideas.

Having said that, however, I have begun to believe that holding 15 stocks may not be enough. Indeed, with the increase in volatility of individual stocks and the need for broader representation across a variety of sectors as well as stock classifications (large cap, mid cap, small cap, growth, value, U.S., foreign), it is tough to get all the diversification across equities that is needed in just 15 stocks.

So, if 60 stocks is too many for individual investors to follow, and 15 probably too few in order to be properly diversified, what's the right number? Well, in my company's managed account business, we generally hold 24-40 stocks in client portfolios, depending on the amount of money in the portfolio devoted to equities. In my personal portfolio, I own about 25 stocks. But I also own a number of mutual funds, especially in my 401(k) plan.

Thus, I think a fairly workable number for stocks in a portfolio is probably in the neighborhood of 25-35 individual stocks, perhaps a bit fewer if you balance those holdings with mutual funds.

Does that mean that if you own just 10 or 15 stocks that you should get to 25 or 30 stocks in a hurry? Not necessarily. However, you should be aware that by owning 10 or 15 stocks, you are taking on greater risk today - as a result of the increasing volatility of individual stocks - than you may have been assuming just a decade ago.

If that increased risk puts you out of your comfort zone, then you probably need to diversify across more individual stocks. An alternative would be to include mutual funds in your portfolio mix.

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