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As I understand it, a fund is a portfolio of investments.

If I buy a share of the fund, what does "my" portfolio of investments look like? Of course I just own that one share of the fund, but if you had to write it out as a portfolio, what would it look like?

For example, imagine a very simple fund of 1 equity and 1 bond, and the fund has 150 dollars in the equity and 50 dollars in the bond. If I buy "one share" of the fund, what does my portfolio look like? Or, in other words, what corresponding investments would I have to make to get the same investment?

My guess would be that if the fund has 200 total dollars invested in the equity and the bond, then my "1 share" corresponds to a 1/200 = 0.5% share of those positions, so my actual portfolio is one which has 7.5 dollars in the equity and 2.5 dollars in the bond, and an investment of total 10 dollars.

Or what?

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  • Are you asking about what it looks like from your point of view, or from the investment firm's POV? Because your statement would say: "Owned: 1 share of the fund". That's it.
    – RonJohn
    Aug 24, 2021 at 18:05

2 Answers 2

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My guess would be that if the fund has 200 total dollars invested in the equity and the bond, then my "1 share" corresponds to a 1/200 = 0.5% share of those positions, so my actual portfolio is one which has 7.5 dollars in the equity and 2.5 dollars in the bond, and an investment of total 10 dollars.

This is not exactly correct. The fund would have a total "Net Asset Value" (NAV) of $200, but what each unit is worth depends on how many units the fund is divided into. If the fund was divided into 200 units (not shares) and you owned one, then you would have $1 (not $10) invested in the fund, which would be equivalent to owning $0.75 worth of the equity and $0.25 worth of the bond to match the fund's allocation.

Also note that almost no one thinks of fund investments this way. I have never heard of a retail investor breaking down their fund investments into their constituents - they just look at the fund as the investment. The only time that this type of detail is helpful is when you are looking at overlap between funds. If you invest in four different funds and they all have heavy allocation towards popular tech stocks, for example, then you aren't as diversified as if you have 4 funds that had no overlap.

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  • "The only time that this type of detail is helpful is when you are looking at overlap between funds." Yes, and @Dukie is calculating correctly to find this overlap. Aug 24, 2021 at 22:20
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so my actual portfolio is one which has 7.5 dollars in the equity and 2.5 dollars in the bond, and an investment of total 10 dollars.

If you have $10 invested in the fund and the fund manager tells you that the split between stocks and bonds is 75% stocks and 25% bonds then your understanding is correct.

Keep in mind that an active fund could change this split everyday buy buying and selling their investments. Even if they don't sell any investments the split could drift over time depending how the individual investments perform.

It is a good idea to think of things this way when determining how aggressive your investments are. Younger people generally pick more aggressive investments, while people who are spending their investments tend to be less aggressive. There are funds that operate by shifting their percentages over time. These are referred to as target date funds. In the US you will also find many 529 programs operate in a similar manner.

Knowing the split can help you plan your allocations across the universe of investment options.

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