What's the magic number?

Every child has heard the saying, 'Don't put all your eggs in one basket'. The investing version of this idea is diversification and every investor knows that diversification is good. For mutual fund investors it means that they should not invest in just one or two funds, but must spread their investments across lots of funds. So they decide that investing in two funds is better than one, three is better than two, four is better than three and so on. Where does this stop? Is investing in 10 funds better than 9? How about 20? Or 50 or even 100? At some point diversification becomes pointless, and then it becomes counterproductive and eventually, it becomes ridiculous. Of course, most investors would think the limit of diversification to be a strange idea. A few years ago, someone asked me how many funds he should invest in. I said that three or four was a good number. Later, the person mailed me his portf