Multiple choice

An equity fund can be said to be concentrated when

  1. it invests in only in two or three stocks

  2. it invests in many companies of the same sector

  3. top ten holdings account for more than 50% of net assets invested

  4. top ten holdings account for more than 25% of net assets invested
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A concentrated fund has significant exposure to a limited number of holdings, typically when top 10 exceed 50% of net assets. Only two or three stocks (A) would be extremely concentrated (too narrow). Same sector concentration (B) is sector concentration, not portfolio concentration. 25% threshold (D) is too low - many diversified funds exceed this. 50% is the accepted concentration benchmark.

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