Mutual Fund Diversification Rule
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Mutual Fund Diversification Rule
Mutual Fund Investors in India heard a lot about diversification and mostly all of them follow the same thing for
their mutual fund portfolio by having a diverse number of mutual fund schemes across different categories in their portfolio, many of those who are reading this post are also doing this, nobody knows the ideal mutual fund diversification rule.
The important thing that we need to understand is that why are we actually investing in Mutual Funds? Isn’t it because these diversify our investments across different companies available to invest? Then why we diversify that is already diversified?
Well, I’m personally in favour of category-wise diversification rather than scheme-wise diversification. This stands more logical after the Categorization and Rationalization of Mutual Fund Schemes by SEBI in Oct 2017. Because it helps investors to find the best in category that stands true to label.
So, What is Mutual Fund Diversification Rule?
Well, to not have 15-20 different schemes in portfolio for any amount. It is to have just 5-7 schemes across category & asset classes for any amount of portfolio whether it’s Rs.10 Lakhs or Rs.10 Crore.
Review & Rebalance your portfolio at fix intervals. Scheme Review is important as well the Asset Rebalancing is important. So one needs to focus on these two things & will do great in overall portfolio performance.
If you have any query, you can ask me on twitter @gurpreet_saluja
Hi, I’m Managing Director at Gurpreet Saluja Financial Services where I help my investors to invest in mutual funds and achieve their financial goals. I’m also a Value Investor and here I write about Personal Finance & Investing.
