over-diversification???

kalyanvgopal · #1 22nd June 2007, 01:04 AM

Hi All,

I have a very basic question. How do I assess over diversification in my portfolio.

================================================== =====
Debt-Floating Rate ----------------------------------------- 22.03%
================================================== =====
Reliance Floating Rate Fund (G): 22.03 %

================================================== =====
Hybrid: ----------------------------------------- 16.56%
================================================== =====
Fidelity Multi-Manager Cash Fund (G): 16.56%

================================================== =====
Equity Diversified ----------------------------------------- 52.59%
================================================== =====
DSP-ML India Tiger Fund - Regular Plan (G): 5.56%
Reliance Vision Fund (G): 5.52%
Sundaram BNP Paribas Select MidCap (G): 2.23%
Fidelity Equity Fund (G): 11.17%
ICICI Pru Infrastructure Fund (G): 3.51%
Reliance Growth Fund (G): 9.18%
SBI Magnum Global Fund (G): 15.42%
================================================== =====

I have set up STP from Reliance Floating Rate Fund (G) to Reliance Growth Fund (G) and also Fidelity Multi-Manager Cash Fund (G) to Fidelity Equity Fund (G). I have started my MF investments around 2 months before. So, in future (3-6 months) my contributions to Debt and Hybrid funds will come down.
I have also recently applied for Franklin Templton High Growth Companies Fund (G).
So, now I am skeptical about being over diversified as one of my financial agents pointed about it.
Can any body give me some tips on calculating over-diversification in my portfolio? As a precautionary measure what kind of parameters I need to identify in a mutual fund for appropriate diversification. Are there any good portfolio managers assist me in calculating the same?

Thanks in advance
Regards
Kalyan

SavantGarde · #2 3rd July 2007, 09:20 AM

Quote:

Originally Posted by kalyanvgopal

Hi All,

I have a very basic question. How do I assess over diversification in my portfolio.

================================================== =====
Debt-Floating Rate ----------------------------------------- 22.03%
================================================== =====
Reliance Floating Rate Fund (G): 22.03 %

================================================== =====
Hybrid: ----------------------------------------- 16.56%
================================================== =====
Fidelity Multi-Manager Cash Fund (G): 16.56%

================================================== =====
Equity Diversified ----------------------------------------- 52.59%
================================================== =====
DSP-ML India Tiger Fund - Regular Plan (G): 5.56%
Reliance Vision Fund (G): 5.52%
Sundaram BNP Paribas Select MidCap (G): 2.23%
Fidelity Equity Fund (G): 11.17%
ICICI Pru Infrastructure Fund (G): 3.51%
Reliance Growth Fund (G): 9.18%
SBI Magnum Global Fund (G): 15.42%
================================================== =====

I have set up STP from Reliance Floating Rate Fund (G) to Reliance Growth Fund (G) and also Fidelity Multi-Manager Cash Fund (G) to Fidelity Equity Fund (G). I have started my MF investments around 2 months before. So, in future (3-6 months) my contributions to Debt and Hybrid funds will come down.
I have also recently applied for Franklin Templton High Growth Companies Fund (G).
So, now I am skeptical about being over diversified as one of my financial agents pointed about it.
Can any body give me some tips on calculating over-diversification in my portfolio? As a precautionary measure what kind of parameters I need to identify in a mutual fund for appropriate diversification. Are there any good portfolio managers assist me in calculating the same?

Thanks in advance
Regards
Kalyan

Kalyan,

Forget About Being Over-Diversified, It Seems Like You Are Basket Buying MFs, Treat The Chap To A Nice Dinner or Lunch Who Suggested You Are Over-Diversified, And Another Thing Treat MFs As Shares & Go For Them When The Market Corrects & NAV Is Down.

Happy & Safe Buying

SavantGarde

niranjan190 · #3 5th July 2007, 11:03 PM

Hi Kalyan,
My small suggestion,
You have 7 diversified funds. some of them have the same objective.
May be you can reduce them to 3.

1. Midcap Category:
Sundaram Midcap, Reliance Growth, SBI Global are midcap oriented funds. I would prefer to club all to reliance growth, as it is the consistent performer for the last 10 years.

2.Infrastructure Sector:
DSP TIGER and ICICI Infra both are infrastructure funds. But DSP is stable and consistent. I would suggest to exit iciciinfra and put in DSP TIGER.
( personally I don't prefer infra sector as it is risky. you may look at DSP Opportunities which looks at opportunities in all sectors)

3. Large Cap:
Reliance Vision and Fidelity are large cap funds. Reliance vision has a good track record for the last 10 years. Fidelity is a new entrant but very promising. I would suggest to have Fidelity in this category..

Before taking any decision, consider short term tax implications.