This study aims to identify the number of stocks required to form a well-diversified portfolio in Pakistan. To identify the optimal number of securities we collected data from Bloomberg for the period of 2009-2015. Companies are randomly selected from the Pakistan Stock Exchange. The 40 portfolios are formed by adding different securities (without replacement) by assigning equal weights to all the securities. The study concludes that a portfolio of 20 securities can diversify significant amount of risk