This paper examines the portfolio selection problem when investors should pay for information acquisition and have psychological bias． We propose a model to analysis the interaction between information choice and investment choice，and find that the investor’s optimal information acquisition strategy is using all the information to learn about the asset with the highest Sharpe ratio，which induce an under-diversification portfolio．The model also shows the psychological bias will cause an under-diversification portfolio． We use all mutual fund trade data between 2002 and 2007 in Shenzhen Stock Exchange to examine our hypothesis． The empirical evidence supports the hypothesis of asymmetric information hypothesis． Under-diversification portfolio is caused by superior information of mutual funds in Chinese Stock Markets．