Investment in stocks and expected return from such investment always comes with risk. Financial economists and financial analysts have been working for years to find ways to minimize risk. What all financial analysts believe is that creating well-diversified portfolio can minimize risk. Fama (1976), Elton & Grubber (1977), Evans & Archer (1968) and many other analysts have shown that well-diversified portfolios can actually minimize risk and have suggested the minimum number of stocks required for a well-diversified portfolio. In this paper portfolio diversification theory is applied for the investors investing in the Karachi Stock Exchange. Fifteen (15) securities were randomly selected and equally weighted portfolios were created. Standard Deviations for all portfolios were calculated and the results were analyzed. The study concluded that a portfolio of 10 stocks can diversify away significant amount of risk.