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  1. #1

    How much is too much in one mutual fund/ETF?

    I've often read that you shouldn't have more than 10% of your portfolio in a single stock but what about a mutual fund or ETF? Since those are generally broadly diversified, is there any rule of thumb about those? What if it's a sector fund like commodities or energy or health care? Then what? Does the 10% rule still apply?

  2. #2
    I'll try, but no means an expert, so here are my thoughts from what I've read...

    if you have a fund that is 5% or less of your total investments, then it is not really worth being in that fund as it cannot really "move the needle" on your investment dollars.

    10% is a suggestion for individual stock and probably would include funds that are not diversified enough (sector funds).

    If you know of the 3-fund portfolio, that would suggest something like 40% in Total US Stock fund, 20% Total International and 40% in Total Bonds... so that shows more than 10% is "acceptable"

    guessing you're thinking about VGHCX among others...

    Vanguard Wellesley is at about 33% of my total investments...

  3. #3
    100% is fine, if the fund/etf is diverse enough.

  4. #4
    I don't think it matters. Any good Mutual fund is highly diversified anyway. It's not the same as having a whole bunch of money concentrated in shares of stock of one company.

  5. #5
    That does matter. You could set up a 3 fund portfolio with total U.S. stock, total international stock, and total bond. That shouldn't be subject to a sector specific issue (up or down).

    But then you can tilt towards tech, energy, health care or value via funds or ETF's. Just like with stocks, if you tilt too much you take on risk (and opportunity).

    DS, I think you are heavily tilted towards health care right now in a mutual fund. That's fine, but if it gets higher than 10% of your total portfolio, I think you need to evaluate the risk you are taking. Obviously it has been very good for you.

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