POSTED BY April 4, 2012 12:15 pm COMMENTS (5)ON
I’m back with one more question. Everybody recommends having only 3 or 4 mutual funds so as not to over-diversify.
But if I want to have a goal based approach to investing, how can I avoid having more than 4 funds?>
Currently I have 3 goals:
1) retirement — 25 years from now
2) Kid’s higher education — 19 years from now
3) Kid’s marriage — 25 years from now
If you look at the above, all are long term goals. So ideal portfolio allocation would be (just as an example) — 1 Large Cap, 1 Multicap and 1 Midcap (to add some additional gains with some risk)
So assume I have the following portfolio:
1) Franklin Bluechip fund — Large Cap
2) HDFC Equity fund — Multicap
3) IDFC Premier — midcap
So what will these investments be for? All 3? Doesn’t it make sense to diversify for each goal or have separate funds for each goal and monitor separately?
The reason being, my kid’s education may cost 50lacs in 20 years, but retirement in 25 years may require 1.5 crores. So, the investment strategy for each should be different and may result in a holding of more funds which is my current situation. Am I missing something here?
I’ve not added the additional fact that Debt should be part of your portfolio, but let’s ignore that for the moment to avoid more confusion.