Diversification is a fundamental principle for investors when forming a portfolio. When investing in mutual funds and exchange-traded funds (ETFs), purchasing a single fund comes with the benefit of indirectly holding a large number of securities; however, many funds are not as diversified as some may expect. This article documents the large concentration of portfolio holdings of many funds. The degree of concentration varies based on fund investment objective, size, and structure. High levels of concentration often are tied to managers making active bets on the portfolio weights of holdings. This concentration relates to higher idiosyncratic risk (risk originating from factors tied to a specific security or small group of assets) and, for sector and style funds, greater market risk exposure. Even though many funds make large bets on the same stocks and have overlapping holdings, a strategy of investing in multiple funds with a similar objective can often lead to much lower portfolio concentration and reduces idiosyncratic risk.