I have to disagree with Matt Krantz of the USA Today. In his reader Q and A titled, “Six stocks? No, you are not diversified.”, he explains to his reader that he does not think owning six stocks in different sectors means you are diversified. In general, I get the point he is trying to make to the reader. Yet, he doesn’t explain different types of risk such as systematic versus unsystematic. Instead he just tells the reader to invest in an ETF.

In the acadamia world of finance there have been different theories as to how many stocks signficantly reduce unsystematic risk. Some researchers say 5-10 individual stocks in different sectors, while others say a “basket” of 12-18 stocks will significantly reduce risk.

The main reason I disagree with Mr. Krantz is that he is telling someone who has invested in individual stocks to “get out”. I completely disagree. If someone is going to put the time in to try and invest in individual stocks, it’s not great advice to tell them to invest in an ETF without knowing their background or “story”.