What Are Holdings?

Holdings are the contents of an investment portfolio held by an individual or an entity, such as a mutual fund or a pension fund. Portfolio holdings may encompass a wide range of investment products, including stocks, bonds, mutual funds, options, futures, and exchange traded funds (ETFs).

Key Takeaways

  • Holdings are the contents of an investment portfolio held by an individual or an entity, such as a mutual fund or a pension fund.
  • Portfolio holdings may encompass a wide range of investment products, including stocks, bonds, mutual funds, options, futures, and exchange-traded funds (ETFs).
  • The number and types of holdings within a portfolio contribute to the degree of its diversification.
  • Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio; a portfolio constructed of different kinds of assets will, on average, yield higher long-term returns and lower the risk of any individual holding or security.
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Understanding Holdings

The number and types of holdings within a portfolio contribute to the degree of its diversification. Diversification is a risk management strategy that mixes a wide variety of investments within a portfolio. A portfolio constructed of different kinds of assets will, on average, yield higher long-term returns and lower the risk of any individual holding or security.

A well-diversified portfolio contains a mix of distinct asset types and investment vehicles; for example, a mix of stocks across different sectors, bonds of different maturities, and other investments. A portfolio that has concentrated holdings in a handful of stocks within a single sector indicates that there is very limited diversification. The proportion of holdings within a portfolio has a significant impact on its overall return. The performance of the largest holdings within the portfolio has a bigger influence on the overall portfolio return than any small or medium-sized holdings in the portfolio.

Retail investors routinely scour the lists of the holdings of top money managers to piggyback on their trades (and, hopefully, on their success). Investors may seek to replicate the trading activity of the most successful portfolio managers by buying stocks where the manager has initiated a long position or added significantly to an existing position and selling positions when the manager has exited a stake. This strategy may not always be successful for the average investor, given the considerable time lag between the time when the manager completes the trades and the time when the fund's holdings are made available to the general public.

The holdings of famous and smaller fund managers are published quarterly through a Securities and Exchange Commission (SEC) filing known as a 13F. Investors have 45 days until the end of the quarter to report their holdings for the previous quarter. The requirement applies only to long stock positions, however, which means other holdings such as short positions, options, and foreign holdings are not disclosed.

Holdings vs. Holding Companies

A holding company is a type of company that holds the outstanding shares of other companies. A holding company usually does not provide any other services—such as producing goods or services—or engage in business directly. Rather, a holding company only serves as an ownership vehicle of other companies or investments. Sometimes, a company that is intended to be a pure holding company identifies itself as such by adding the word "Holding" or "Holdings" to the end of its name.

A famous example of a holding company is Berkshire Hathaway Inc., the Omaha, Nebraska-based company that has Warren Buffett at its helm as the chair and chief executive. Berkshire Hathaway started as a textile manufacturing company in the early nineteenth century. While the company was successful in its first decades, it suffered alongside the decline of the textile industry after World War I.

In the 1960s, Buffett began buying stock in Berkshire Hathaway. He eventually bought enough stock in the company that he could take control of it and oust the current owner of the company. At first, Buffett maintained Berkshire Hathaway's core business of textiles but, in 1985, the last textile operation was shut down. For several decades now, Berkshire Hathaway has only been a holding company that Buffett uses to acquire, hold and sell various investments in other companies. Some of Berkshire Hathaway's key holdings include the Kraft Heinz Company, American Express, The Coca-Cola Company, and Bank of America.

In some cases, investors may choose to create a limited liability company (LLC) that can then own all of their investments. They may do so to reduce their personal exposure to risk, minimize their taxes or pool their investments with other people, such as business associates or family members.