PT  - JOURNAL ARTICLE
AU  - Robi Elnekave
TI  - Portfolio Size
AID  - 10.3905/joi.2002.319522
DP  - 2002 Nov 30
TA  - The Journal of Investing
PG  - 31--37
VI  - 11
IP  - 4
4099  - https://pm-research.com/content/11/4/31.short
4100  - https://pm-research.com/content/11/4/31.full
AB  - The number of holdings in a portfolio plays a significant role in capturing the excess return of an active management strategy. Portfolio size also has a considerable impact on variability of the outcomes—minimizing the tracking error between the portfolio and the strategy. Yet the number of positions held in a portfolio is seldom arrived at through deliberate study. The author analyzes the size question from three perspectives: as a statistical sampling problem, as the outcome of a fundamental law of investing, and as the result of iterative simulations. The results demonstrate the importance of actively selecting the number of holdings for a given strategy.