A. There are a couple of possible explanations and there are exceptions as well.
First of all, for index funds, by definition, they need to mimic the components in the indexes they follow.
For the other funds, the main concern is to lower risk of not keeping up with some of the main indexes, such as S&P 500's performance, especially in a bad year. There is a study shows that if you own 1,000 stocks, your portfolio will be 61% less volatile than if you own just one stock.
However, the same study also indicates that if you trim the holding to 20 stocks, your volatility will be 59% lower!
The implication to you? You can research funds that own just 2-3 dozen stocks, or you can be that active investor by owning just a handful stocks, although you have to have the stomach for volatility.