- Balance risk management and conviction
- Diversify at the asset class level, too
Professional stockpickers have a patchy record: research by Morningstar published earlier this year suggested 90 per cent of funds bought more losers than winners between 2013 and 2023.
But this doesn’t necessarily mean they lack skill. What if they are just buying too many shares, diluting high-conviction plays with filler stocks? The academic paper Best Ideas (Antón, Cohen and Polk, 2009) suggests that while fund managers’ favourite picks often beat benchmarks, performance trails off after about the top 20 stocks they hold.