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Re: number of funds in portfolio
valunvstr
05-17-2008, 8:50 PM | Post #2519029
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I think I might have to disagree in part with Oil on this one because a target date fund, as a result of the mix of different styles, asset classes, etc. IS diversified, as you said. A fund can have 150-200 holding (like a Magellan mentioned above) but because the stocks that are being selected fall into a similar criteria it can do quite poorly for a very long period of time. In fact, if it is a flawed strategy it may never produce good returns. So, even with hundreds of stocks in a particular portfolio, if the stocks are similar based on a discipline the manager implements, it might be considered diversified by "number" of stock holdings but does not produce the kind of diversification that most investors look for. And what I mean by that, is owning securities that act differently in various market cycles. Usually, owning several different funds (of course with different disciplines, asset classes, etc.) can create that kind of diversification. I do agree however that many investors own way too many funds. I will state for the record that I do have a huge bias in this case. I dislike indexing and I have found it VERY difficult to find fairly young proven managers or teams that run funds that can meaningfully out perform over a LONG period of time. With many proven managers being older it is tought to find someone you can stick with for a LONG period of time. Many others don't pay attention to taxes and finally some of the best performance comes from funds that are not going to repeat performance because of asset bloat. With that said, I have almost 80% of my invested assets with BRAGX and BRAIX. 51 yr old manager. I would rather rely on a computer that a person (although the person must maintain and tweak the model to keep it a sound strategy) and he pays a lot of attention to taxes. Yes, that is concentration but based on all of the issues I mentioned above, I find it very hard to build a portfolio spread out among several different funds that can outperform over a long period of time with tax efficiency (or at least tax aware).
Topics
diversification
indexing
managers
target date
Tax Efficiency
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