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Hi @pcunniff , when you increase the number of stocks in your portfolio, unsystematic risk (diversifiable risk) reduces, but at a slower/decreasing rate. I presume you meant this chart below.
As you can see below, to take an extreme, if you add infinite number of stocks, there comes a point where adding 1 extra stock to your portfolio doesn’t do much to reducing your unsystematic risk, i.e. the impact of adding 1 stock to unsystematic risk decreases at a DECREASING rate. If it were to decrease at an INCREASING rate, you wouldn’t see the shape of the red curve below, but instead a mirror image where the curve hits zero eventually as stocks are added to portfolio – which doesn’t make sense.
Does this help?