Hocus Focus: Remember That Downside to Focused Funds?
If less was more a few years ago, it certainly seems like it's less again.
The most fundamental reason for owning a mutual fund is that it conveniently and cheaply spreads your money across a broad portfolio of stocks -- the average U.S. stock fund holds some 140 stocks, according to Morningstar. But the frothy, tech-led bull market of the late 1990s warped this idea. The market didn't tumble too often during its northward climb, so diversification just seemed like a drag on returns, not a way to reduce risk. Funds like (JAVLX Quote)Janus Twenty that kept their holdings lists short and their tech bets high roared ahead of more diversified growth funds. As a result, investors and fund companies came down with focused-fund fever -- lest we forget, Janus Twenty, with some $25 billion in its coffers, is closed to new investors. ...
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