Mutual Funds Often Fall Short in Diversification
Many of today’s top mutual fund families are not as
diversified as you may think. Many of your fund families concentrate their
holdings in a limited number of stocks. Last year, Barron’s found that one
quarter of Fidelity Management’s nearly $250 billion of assets were
concentrated in their 30 favorite holdings. Which means that you may own many
of the same holdings even though you have invested in 3 or 4 different funds.
In a bear market this could present a problem as the fund family is forced to
unload stocks as investors get cold feet. Our recommendation is an approach
that includes the entire fund universe so that you are able to truly get
diverse investment philosophies working for you.