Hedge funds are playing with fire as they all cram into the same stocks — and their behavior could make the next market crash even worse
There's also the matter of what greater-than-normal overlap says about the market. Since hedge funds are normally equated to"smart money," and more retail-driven mutual fund flows are referred to as"dumb money," the fact that they're both so invested in the same stocks implies a high degree of conviction.
Further, knowing what stocks are in this group can also be valuable on a contrarian basis. That's true to the degree that crowded positions end up working against investors — something thatNo matter how you slice it, or end up applying the knowledge overall, there's no denying that knowing which stocks fall in the shared favorites group is valuable.or index ready-made for investment.
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