SIP in single mutual funds or multiple ?

POSTED BY charan4ever ON March 27, 2014 1:55 pm COMMENTS (8)

Hello Gurus,

I want to invest in midcap funds for long term and I have other SIPs going on for diversified large cap funds. I have seen IDFC premier equity fund performing well across time frames. So, thought of investing in that fund. However I want to take help from the experienced guys to double check my decision on going for a single fund in that category or multiple funds with similar investment mandate.

My question is “Shall i do a SIP in one fund for 5K or split the amount into top 3 funds with 2K,2K and 1K ratio?” which one do you think will be beneficial in long run say 10 years. I have been investing in direct funds till now and will invest in direct mode only in future as well.

As I have seen there is no guarantee for future performance for any fund, why should I go with a single fund and be at risk, instead i can go for top 2-3 funds and diversify the risk in that category. Managing funds is not a problem for me, as i use perfios money manager auto-update functionality to have all funds at a single place.

Is my understanding correct or are there any flaws in it. Please guide me.

Thanks in advance,

Charan

8 replies on this article “SIP in single mutual funds or multiple ?”

  1. ashalanshu says:

    Dear Charan, al is well that ends well. 🙂

    Thanks

    Ashal

  2. ashalanshu says:

    Dear Charan, Yes. it’s your money and I respect your choice. I rest my case here.

    Thanks

    Ashal

  3. kuntal says:

    Hi Charan,
    Your basic idea is flawed- “We dont know where the sensex would be at that point of time could be high or low.. if it is at highest point of time, is it suggestible to invest in another fund in lumpsum.. no right”. As your money is ALREADY IN EQUITY, so while changing fund, it does not matter if sensex is at high or low point. You are merely changing the vehicle. Hope you are getting my point.
    Thanks,
    Kuntal.

    1. charan4ever says:

      Hi Kuntal/Ashal,

      Thanks for pointing out.. Now I know where my idea was flawed..

      Thanks all for your suggestions..

      Charan.

  4. charan4ever says:

    Hi Ashal,

    I think 5 funds from each category would be an overhead and moreover you can’t find 5 funds performing well at any point of time.

    Main reason for choosing more than fund in a category:
    If you are investing in a fund via SIP and there is a change in fund manager or the AMC has sold the schemes to other AMC and the fund started performing badly for 2-3 quarters… what would be the options at that time? redeem from that fund and invest in another fund..

    We dont know where the sensex would be at that point of time could be high or low.. if it is at highest point of time, is it suggestible to invest in another fund in lumpsum.. no right.. so what do you do with the redeemed money?? you might need to invest in liquid fund and start a SIP again as a fresh start..

    So in order to avoid the above scenario, I thought of investing in 2-3 funds in the same category.. in which case atleast there would be a SIP going on in one fund and we can increase the SIP amount in one fund and redeem the other one which is performing badly..

    Most of the people say that all funds in the same category have similar portfolio, so you should invest in a single fund instead of multiple, if that is true then why are there is huge difference in returns for different funds in same category.. ofcourse there would be a overlap of stocks if you invest in multiple funds, but it would be the same if you invest in a single fund as well as more amount would be invested in a single fund the concentration of each stock would be more.. Am I missing something here?

    If you want to be sarcastic about investing in multiple funds, I don’t care… afterall it’s my hard earned money and I want to be safe and play safe with my investments..

    Thanks,
    Charan

  5. ashalanshu says:

    Dear Charan, how about investing in 15-20 funds to spread the risk? Say 5 funds from large cap, 5 funds from midcap, 5 funds from multicap and 5 funds from balanced category?

    Thanks

    Ashal

  6. charan4ever says:

    Thanks for your views hemanth. Will check the portfolio of funds and take a decision on that.

  7. Hemanth Chandra says:

    Dear Charan,

    Check the portfolio of the 3 funds you wish to invest. If their portfolio is similar, then though you invest in 3 different funds, there is nothing much diversification.

    If their portfolio is different, then you idea of diversification works if you invest in 3 funds.

    Regards,
    Hemanth.

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