Less Is More
When the right stocks fill out a focused fund, a little can go a very, <i>very</i> long way.
When a mutual fund has 80, 100 or 200 stocks in its portfolio, it's hard to call it a stock-picker's portfolio. Full portfolios are usually described as "diversified"-in some cases, "over-diversified." One of the advantages of diversification is that it's supposed to lessen the performance blow in down or volatile markets. The disadvantage is that highs may be hard to reach.
The portfolios of nondiversified funds like Van Kampen's Focus Equity Fund typically have only a few dozen stocks. The right portfolio manager-assuming he or she can hone in on the right stocks at the right time-can make a nondiversified fund sing.
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