% of company in a fund

I read that the law was that a mutual fund could have no more than 5%
in one stock and then I read where it is 10%.

Does anyone know for sure?

Re: % of company in a fund

Funds can declare themselves to be diversified or non-diversified. I
admit that I don't know the percentage numbers that you are asking.
But I remember that Longleaf Partners sent out a proxy proposing a
change by allowing the fund to be non-diversified. Naturally it
passed. Then the fools went out and loaded up the fund by investing
25% of the assets in Waste Management. They were buying while the
stock was plunging. It went down and down. I bailed after learning
that these people were not as bright as I thought them to be.

Mo

Re: % of company in a fund

wrote:
>
> I read that the law was that a mutual fund could have no more than 5%
> in one stock and then I read where it is 10%.
>
> Does anyone know for sure?

Two different rules:
1) No more than 5% of the fund may be invested in securities of a single
issuer (whether that is bonds, stock, or whatever)
2) A fund may not own more than 10% of the voting securities of a given
company

(These rules apply only to 50% of the fund's assets, or to 75% of the
fund's assets if it is diversified; the remainder can consist of as
little as a single security.)

For funds in general (the 50% rule), see the Internal Revenue Code
section 851 (b)(3)(A)(ii).


For the diversified fund rule (the 75% rule), see the Investment Company
Act of 1940, Section 5(b)(1).


Thanks to Chuck Jaffe (email communication) for the first citation.

Mark Freeland

Re: % of company in a fund

On Mon, 10 Oct 2005 04:02:43 GMT, Mark Freeland <>
wrote:

> wrote:
>>
>> I read that the law was that a mutual fund could have no more than 5%
>> in one stock and then I read where it is 10%.
>>
>> Does anyone know for sure?
>
>Two different rules:
>1) No more than 5% of the fund may be invested in securities of a single
>issuer (whether that is bonds, stock, or whatever)
>2) A fund may not own more than 10% of the voting securities of a given
>company
>
>(These rules apply only to 50% of the fund's assets, or to 75% of the
>fund's assets if it is diversified; the remainder can consist of as
>little as a single security.)
>
>For funds in general (the 50% rule), see the Internal Revenue Code
>section 851 (b)(3)(A)(ii).
>
>
>For the diversified fund rule (the 75% rule), see the Investment Company
>Act of 1940, Section 5(b)(1).
>
>
>Thanks to Chuck Jaffe (email communication) for the first citation.
>
>Mark Freeland
>

Thanks for taking your time to teach me something.

I really appreaciate your help.