Hi,
I have read a lot of comments on this forum regarding MF investments, many of which have helped me make decisions on my own investments.
One thing I have often come across is –
Do not select too many funds for your investments, but regularly invest in just 2-3 (or max 4) MFs of diffrent categories.
I do agree with above to some extent because investing in 10-15 MFs will just lead to stock overlap across these funds, and wont really diversify your portfolio.
However I also have another view –
Suppose I invest regularly in just 2 MFs – scheme A (large caps) & scheme X (small/mid caps), and say after 4 yrs i have an investement of about 2 lakh in each of them. Now if due to some reason (not related to market condition – say change of fund mgr or some other internal problem with that scheme of the fund house), scheme A starts performing very poorly and continues to do so. I risk getting very low / -ve returns on 50% of my investments.
So wouldn’t I be in better condition had I split my large cap investments between 2 Schemes A & B? In other words, would it not be advisable to diversify amongst the MFs themselves, to ensure you are also protected from Fund house / Scheme specific risk?
Does this make sense or am I simply over-analyzing 🙂 ?
Would like to hear your views on this..
Regards,
Vaibhav