Is it not risky to have only 4 - 5 funds in your portfolio?

#1
Hello

Once again another common advise which i find bit confusing.

Experts advise to avoid over diversification and better control, one must pick up good 4 to 5 Mutual Funds well diversified among large, mid, multi caps and invest only in them.

Let us say I choose ABC fund performing well since 1990 and start SIP for the next 10 years. As you would quite agree, Fund manager plays a very important role regarding fate of a particular fund. Apart from other factors, it is more of what he thinks, how he churns the stocks etc. Suddenly after 10 years , this ABC fund manager exits.. what happens next? We have seen in many cases (example Magnum Tax Gain), the moment the manager exits, the funds looses its sheen. Now having invested a huge sum in this ABC fund, what should be my option? Withdraw gradually to another performing fund in same category or take it away at one stroke and transfer to another fund.

Wont it be better if we have 10 - 12 funds? That would not allow a big chunk of money in one fund alone but divided among all the 10 - 12 funds. By this way, if one fund fails after X years, it is easy to transfer a smaller sum than a big chunk?

Makes sense.. do reply even if it does not :) please!! trying to get the basics right

Thanks

Jeet
 

Nava

Active Member
#2
Hello

Once again another common advise which i find bit confusing.

Experts advise to avoid over diversification and better control, one must pick up good 4 to 5 Mutual Funds well diversified among large, mid, multi caps and invest only in them.

Let us say I choose ABC fund performing well since 1990 and start SIP for the next 10 years. As you would quite agree, Fund manager plays a very important role regarding fate of a particular fund. Apart from other factors, it is more of what he thinks, how he churns the stocks etc. Suddenly after 10 years , this ABC fund manager exits.. what happens next? We have seen in many cases (example Magnum Tax Gain), the moment the manager exits, the funds looses its sheen. Now having invested a huge sum in this ABC fund, what should be my option? Withdraw gradually to another performing fund in same category or take it away at one stroke and transfer to another fund.

Wont it be better if we have 10 - 12 funds? That would not allow a big chunk of money in one fund alone but divided among all the 10 - 12 funds. By this way, if one fund fails after X years, it is easy to transfer a smaller sum than a big chunk?

Makes sense.. do reply even if it does not :) please!! trying to get the basics right

Thanks

Jeet
Any reply for the above question in red..?
 

bpr

Well-Known Member
#3
MFs are to be avoided altogether.
I have so many relatives who have invested in MFs have got negligible or negative return even after 5 years.
Sometimes back SEBI started an investigation as to why all the MFs are showing negative return even if the market is good.
My conclusion is there is something wrong with MFs

You are always better off with ETF.
that too only these ones because these are the tried and tested ones and are most liquid. Entry and exit cost are the lowest.
NIFTYBEES
GOLDBEES
JUNIORBEES if u want exposure to midcaps.

with the above 3 instruments u r achieving diversification to more than 150 companies and gold what more do u want.
 
#4
Any reply for the above question in red..?

I will exit, if there is no exit load or taxes, else i will wait until i dont need to pay exit load fee & taxes.

Before deciding to exit a FUND, do check morning star or valueresearchonline for the ratings of the fund. If the fund has been rated 4 star or above, i will think twice before pulling off from the fund.
 

Subhadip

Well-Known Member
#5
MFs are to be avoided altogether.
I have so many relatives who have invested in MFs have got negligible or negative return even after 5 years.
Sometimes back SEBI started an investigation as to why all the MFs are showing negative return even if the market is good.
My conclusion is there is something wrong with MFs

You are always better off with ETF.
that too only these ones because these are the tried and tested ones and are most liquid. Entry and exit cost are the lowest.
NIFTYBEES
GOLDBEES
JUNIORBEES if u want exposure to midcaps.

with the above 3 instruments u r achieving diversification to more than 150 companies and gold what more do u want.
aha..good suggestion

:thumb:
 

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