While I agree with the idea that for a full time professional investor, it might not make terribly much sense to have too many holdings, just because it will be next to impossible to monitor many companies, I do think that indexing makes the most sense for non-professionals, since to select the best fund managers to earn that elusive alpha might take just about as much effort as selecting the best investments to own, and the laymen might just not have enough knowledge or information to be able to do either.
I have a core-satellite approach for my equity component of my portfolio, where the core comprises globally diversified indexed exchange traded funds (ETFs) while the satellite is a selection of 10 stocks (and I sell off the least potential stock should a better 11th company be uncovered in the course of my research). That is also yet another approach. What is your approach?
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