Big Bet Investing

This is the right kind of market for concentrated stock funds--but only a few beat the averages

Study after study shows that investors get all the diversification they need by owning as few as 10 stocks spread among several industries. Why, then, does the average stock mutual fund hold 134 companies? It's as confounding as the frenetic trading that goes on in many funds--even though the very fund managers triggering the trades preach patience to their investors. Lay the blame on pressure for short-term results, if you like. But these paradoxes seem idiotic to me and probably help explain why most funds fail to keep pace with the market. They don't practice selectivity and patience.

For that, many...

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