Quote:
Originally Posted by mrfeh
Yet another reason to use index funds.
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Yet another reason to understand index funds which, depending on the indexes you own, can give you a specific stock or sector concentration. That may be something you were targeting for or not but you should understand and be aware. Just because a fund passively follows an index rather than being actively managed doesn't mean it won't have a concentration.
A good example is the commonly held index fund QQQ. 11.2% of that fund consists of AAPL! If you held a significant position in QQQ, you might not want to hold AAPL as an individual stock given that more than a tenth of your index fund is AAPL. Or, you might. Depends on what you want to do in your portfolio. But you should be aware of what you own.
Just being an "index" fund doesn't eliminate the possibility that the issue OP is talking about will occur.
Don't confuse "index fund" with "owning the market" or "owning domestic large caps." Many indexes and the funds that follow them are focused on market segments, market caps, etc.
To OP: Knowing what the top few holdings of your funds (actively managed or passively managed index) are can't hurt and is probably a good idea. It's quick and easy to check, so why not?