Ch.10 · Benchmarks and Performance Evaluation · medium
What does 'portfolio concentration' in the top 10 holdings indicate about an equity fund?
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EXPLANATION
When a fund has 50-60% in its top 10 holdings, it reflects high conviction in those positions. This can amplify returns if those stocks outperform but amplifies losses if they underperform. More concentrated funds (focused funds) accept this risk deliberately. Broadly diversified large cap funds typically have 40-50% in top 10. Investors should assess concentration relative to category norms.
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