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Fund Management Diversification

A well-diversified portfolio also consists of taking that extra step

I have invested in Birla Sun Life Equity Fund and Birla Sun Life Frontline Equity Fund. I have also invested in UTI Infrastructure and UTI Top 100. Will they be beneficial for me? I also want to know as to how will mutual funds make profit in the no-load regime?

UTI Top 100, Birla Sun Life Equity, Birla Sun Life Frontline Equity form a very good diversified portfolio. But it would be advisable if your money should be diversified under different fund managements too. If you have to choose two funds then choose one of Birla Sun Life and some other fund. Three or four funds would be able to give you adequate diversification.

Out of the entry load that the fund companies used to charge till now, the maximum amount used to go to those who are responsible for selling schemes. But according to new regulations, if a mutual fund agent wants to take any advisory fee, then he can ask for it directly from you. According to SEBI guidelines, mutual fund companies can charge 2.25 per cent yearly from your investment, which gets deducted from the NAV every day. If some fund is of Rs 100 crore, then in a year, the expenditure is Rs 2.25 crore. Since it is done on a day to day basis, one does not usually get to know that. In this 2.25 per cent, one per cent goes directly to the mutual fund companies as management fees. The rest 1.25 per cent is the actual operating expenses for which the account statement is given or goes into managing the regulatory framework. Now that the entry load has been abolished and many distributors think that they would not get any returns for selling the schemes, mutual funds have made arrangements to give money to these intermediaries through this 2.25 per cent.

I have invested Rs 25,000 in ICICI Prudential Gilt Debt Fund, Rs 30,000 in DWS Investment Opportunity, Rs 24,000 in DSPBlackRock, Rs 10,000 in Reliance Growth - a total investment of Rs 1.70 lakh. At present, I am in need of Rs 60,000. From which of these funds should I retrieve the money from? I have three ongoing SIPs of Rs 2,000 each in Reliance Growth, Reliance Infrastructure and DWS Investment Opportunity.

You should continue with the SIPs as these funds are good. If you really want to redeem the money, then you should bring out the money from you gilt debt fund because the coming 6-8 months could bring in loss in these funds if you had invested in December or January when many people had invested by seeing the prior returns. If the interest rate increases, then it directly affects these funds.

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