 "Tipping Point: Beware of concentration risk in funds")
One of the things that make mutual funds more or less risky is whether they take concentrated or diversified bets. A few measures can tell you whether a fund takes more diversified or concentrated exposure.
The former takes more concentrated bets than the latter. Similarly, if exposure to top three sectors is higher than the median, or if exposure to top three companies in the portfolio is higher than the median, the fund is likely to be relatively more concentrated. Funds that are more concentrated can give you higher returns but will also be more volatile.
The former takes more concentrated bets than the latter. Similarly, if exposure to top three sectors is higher than the median, or if exposure to top three companies in the portfolio is higher than the median, the fund is likely to be relatively more concentrated. Funds that are more concentrated can give you higher returns but will also be more volatile.
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