Building your own fund
By looking at the best investments of successful fund managers, you can create your own portfolio, including the best of the best. One excellent way to build a well-diversified portfolio is to pick a few companies from each of your favorite funds in a variety of asset classes, thus quickly putting together a portfolio that includes companies across a wide spectrum of company sizes, regions, and industries.

Limitations of using fund data
But, like other investment strategies, using fund holdings data doesn't guarantee success. For one thing, many funds buy and sell stocks frequently, so a stock that appears on a list of holdings one day may be sold from the fund the next. As a result, you may buy a stock at exactly the time the fund has sold it. For funds with high turnover ratios, it's important to identify core holdings that the fund has owned for a long time.

Also, many funds own stock in a huge number of companies, so even the top holdings don't represent a large percentage of the portfolio. When such funds outperform their peers, it's more likely a result of more subtle differences in allocating money among similar companies. For instance, a fund might have 4% of its assets in a stock, while the index gives it only a 3% weighting. So if that company does well, the fund will benefit from the larger position. You may not be able to the results of these subtle differences simply by looking at a fund's list of holdings.

However, if you're looking to understand how your favorite fund manager thinks, or if you're looking for good companies to consider, looking at a fund's list of holdings isn't a bad place to start. Keep in mind that you can always just buy the fund and let the manager do the work for you.

For more on funds and your portfolio, read about: