Concentrated funds are a good bet if you have appetite for risk

For the risk averse, buying diversified funds with more stocks might make more sense

The Securities and Exchange Board of India (Sebi) has expressed concern at the high concentration of a few stocks in bank exchange-traded funds (ETFs). But it is not just bank ETFs. A number of diversified equity funds might face the risk of high concentration.

Equity funds (excluding equity-linked savings schemes and sector-thematic funds) can be categorised as concentrated or diversified in accordance with the number of stocks they hold and the level of exposure they have to select sectors and select stocks within their portfolio. In concentrated funds, the fund manager holds fewer stocks, usually 15-20, going up to 25.