Is Portfolio Diversification Better Than Investing More Money in One Nigerian Stock?

I would generally prefer diversification, especially for a beginner. But diversification doesn’t mean buying 15 or 20 different stocks just because you want to spread your money.

For example, imagine you have ₦200,000.

You could put the entire ₦200,000 into one company because you believe it will perform very well.

If that company falls by 30%, your investment could drop to about ₦140,000.

But suppose instead you spread the ₦200,000 across four quality companies from different sectors:

₦50,000 → Banking
₦50,000 → Consumer goods
₦50,000 → Industrial/manufacturing
₦50,000 → Energy

If one investment falls by 30% while the others remain unchanged, your total portfolio would fall by roughly ₦15,000, rather than ₦60,000 if everything was in that one stock.

That’s the main advantage of diversification: one company’s problem doesn’t necessarily destroy your entire portfolio.

However, there is another important point.

Don’t diversify into companies you don’t understand just to have many stocks. Four carefully researched companies can be better than 15 random companies.

If you have strong knowledge of one company and are comfortable with the risk, holding more of it can make sense. But for a beginner, spreading your money across quality companies and sectors can provide better protection.

So my approach would be:

Learn → Select quality companies → Diversify → Invest consistently → Review periodically.

The goal isn’t to own the largest number of shares. The goal is to build a portfolio that can survive when one investment doesn’t perform as expected.