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How Many Mutual Funds Are There In Your Portfolio:


One of my friend is investing in Mutual Funds since a decade and he has around 60-65 mutual fund schemes in his portfolio.There are more than 40 mutual fund companies operating in India, its not surprising to see the long list of mutual fund schemes if any investor is investing since long term.

 

Here we will list the reasons why mutual fund list goes on:

  1. Investment through multiple brokers:Suggestions and investments made from different brokers leads to investment across multiple schemes.
  2. Cumbersome process to modify monthly investment amount: Most of the investors invests through Systematic investment plans.When investor decides to increase the investment amount,its become cumbersome to change/modify it so Investor prefers to invest in new funds rather making changes in existing schemes.
  3. Exit Load / Lock in: Most of the schemes carry exit load for periods ranging from 01 year to 03 yrs.Investors generally not prefer to switch out in new schemes with in exit load period.
  4. Capital gain period: Short term capital gains applicable for Equity funds if units are redeemed / switched out within first year.So if any investor is investing through systematic investment plan then there will be at least few units which have not completed one year and so units are not switched out completely.
  5. Time lag between switches: Its cumbersome to redeem from one scheme and reinvest in scheme of another mutual fund.It also involves time lag of 4-5 days to switch in other mutual fund.
  6. Deviating mutual funds from their objectives:Now a days, most of schemes deviates from their objectives and  schemes having same objective have extreme returns.So investor looks to manage risk & diversify in schemes having same objectives.

What investors can do:

  • Its not a good idea to have huge number of schemes in portfolio.
  • Investor can consolidate schemes based on fund objectives like – Bluechips,Value funds,Mid caps,Debt funds etc and keep max up to two schemes having same objective.Investors can consolidate schemes based on their age,risk profile and goals.
  • Having large number of schemes may not diversify the Risk but leads to unnecessary maintenance.
  • Investor can take help of independent financial advisor if they are at state of indecision.

So, how many mutual fund schemes are there in your portfolio,How do you manage the risk?,Do you think only  2-3 balanced funds can help you to achieve the goals?


Category: Mutual Funds

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