Measure
Effective number of holdings
Definition
How many equally weighted positions a fund behaves like, as opposed to how many it nominally holds.
Formula
N_eff = 1 / Σ wᵢ² (wᵢ = weight of holding i)
How to read it
For an equal-weighted portfolio of N names, N_eff equals N exactly. Any inequality in weights pushes it below the nominal count, and it falls fast: a fund where one position is 10% has an effective count dominated by that one holding.
What it does not tell you
It measures weight concentration only. Fifty names that all move together are more concentrated in practice than the number implies, because it takes no account of correlation between holdings or of sector and factor overlap.
Applied in 2 articles
2Every figure computed with this measure on this site follows the conventions set out in the methodology. All measures →