Another Investing Rule Turned on its Head

Editor's Views: Why the best managers don't diversify, the case for active and passive management and the problem with upfront fees - no one likes paying them

Holly Black 24 January, 2020 | 10:46AM

editor

Diversification, diversification, diversification. It’s drummed into investors time and again just how important it is to spread your risk across lots of different holdings so you’re not vulnerable if one falls. Yet it turns out a lot of the professionals are not following this seemingly sound advice. Even more surprising, they’re doing incredibly well as a result.

Our investigation this week looked at how some of the most concentrated fund portfolios have been performing, and the majority are beating their rivals. Have we all been doing it wrong all this time? Some of these funds and trusts invest in only a handful of names. It could be an incredibly risky strategy if one or two of those bets goes badly.

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About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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