Less Is More When the right stocks fill out a focused fund, a little can go a very, <i>very</i> long way.
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When a mutual fund has 80, 100 or 200 stocks in its portfolio,it's hard to call it a stock-picker's portfolio. Fullportfolios are usually described as "diversified"-in somecases, "over-diversified." One of the advantages ofdiversification is that it's supposed to lessen the performanceblow in down or volatile markets. The disadvantage is that highsmay be hard to reach.
The portfolios of nondiversified funds like Van Kampen'sFocus Equity Fund typically have only a few dozen stocks. The rightportfolio manager-assuming he or she can hone in on the rightstocks at the right time-can make a nondiversified fund sing.
But that hasn't always been the case. In the 1980s, focusedfunds had a hard time topping charts. What changed that?Technology.
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