Testing the Assumption
Tuesday’s column off-handedly stated that, as a group, concentrated stock funds—those funds with relatively few holdings—don’t outperform funds that have large portfolios. That comment could stand some testing. It certainly held true in the past, when I researched the subject, but perhaps things have changed. Also, if concentrated funds do prove to be no better than other types of funds, are they similar in quality? Or outright worse?
I began by defining the term: Concentrated funds are those with 50 equity positions or less; those funds with more holdings are not. It was a false start. Treating the topic as binary, so that all funds land into one of two categories, would be needlessly restrictive.