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Purpose of Long Tail

dryflower
in Fund Discussions
What do you think is the purpose of a long tail in the portfolio construction of many funds and ETFs? Quite often there is a long list of securities that represent a truly minuscule percentage of the fund's assets. I'm talking about percentages such as 0.02%. The prices of these securities could multiply by 20-fold overnight or collapse to zero, and it would not even move the needle on the fund's value. So what's the point? It just seems to complicate matters without adding anything of value.

Comments

  • CrashCrash
    +1.
  • WABACWABAC
    My WAG. Get enough of them in a sector and you are no longer betting on particular stocks. Could be closet indexing. Could be a plain old sector bet.

    There are probably better explanations.
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