What Are Focused Funds?
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What Are Focused Funds?
There is no standard definition for focused funds. The most common reference point is the number of individual stocks a fund holds. Generally, a focused fund will hold fewer than 40 stocks, and some of the most focused funds hold around 20 names. Find how many stocks a fund holds by checking its portfolio in its shareholder report or looking at an online fund report, such as the ones offered by Morningstar and other firms.
Things To Know
- Generally, a focused fund will hold fewer than 40 stocks.
Other meanings
Numbers aren’t everything: a fund can also be considered focused if it concentrates a large percentage of its assets in its top five or 10 holdings. (This style is a common byproduct of investment strategies that also limit the fund’s number of holdings to fewer than 40 stocks.)
Finally, "focused" can refer to a diversified fund’s sector exposure. Some funds concentrate in only one or a few market sectors. For example, a fund might invest a lot in some industries, such as technology and energy, and 0% in others, such as consumer defensive, health care, and utilities. Sometimes, but not always, funds can become focused by sector because they own few individual stocks.