Diversification has been a standard component of portfolio construction over the past 50 years. We will likely see more investors shifting toward more concentrated strategies in the financial industry over the next few decades. Here are the benefits of a concentrated portfolio:

Putting the Best Ideas in Focus

While it’s common for portfolio managers to review numerous investment themes and data points regularly, they also tend to focus on finding the best ideas for their concentrated strategies. This strategy carefully evaluates the multiple factors that affect a stock’s performance.

Instead of focusing on the broad sector or industry analysis, they can also consider company-specific factors such as the dispersion of returns. This type of strategy can help investors outperform their counterparts. According to the experts at Natixis Investment Managers, many portfolio managers’ top 20 or top 10 ideas perform better than their competitors.

Enough Diversification

A concentrated approach to investing doesn’t mean that your portfolio can only have one or two stocks; adequate diversification is still important. Computer-aided factor analysis is an excellent tool to help determine the appropriate amount of diversification. This type of analysis can help investors avoid getting stuck with a large number of stocks.


Computer-aided factor analysis can also help investors identify potential risks and opportunities in the market. It can provide a more accurate assessment of how individual stocks might perform in different scenarios.

Greater Chance for Growth

One of the main components of the investment philosophy of Vaughan Nelson is the concept of concentrated portfolios. For instance, the Natixis VNSE Select ETF uses a combination of factor analysis and long-term growth potential to construct a portfolio with around 30 stocks.


Although broad-based diversification has been standard practice in the investment universe for a long time, it’s still important to consider the factors affecting a stock’s performance. With that in mind, investors must adopt a more systematic approach to portfolio construction.


Diversification Disclosure:

Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.

Concentration Disclosure:

Concentration risk is the risk of amplified losses that may occur from having a large portion of your holdings in a particular investment, asset class or market segment relative to your overall portfolio.

ETF Disclosure – must be both bold and italics to set it apart:

Exchange Traded Funds (ETF’s) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.