Idea Duplication | Value Research Getting the right diversification is important for a balanced portfolio
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Idea Duplication

Getting the right diversification is important for a balanced portfolio

I hold five Multi cap funds, purchased about three years ago. I wish to club these in to one fund. Which fund would you suggest?
- Joel Robello

As a category, multi cap funds are meant to weather all kinds of market conditions and come up winners. This factor makes the fund manager’s task difficult and achieving growth a challenge. The dexterity required by the fund manager reflects the performance of the fund. Having five multi cap fund does not bring in diversification as it just duplicates the idea that this category adopts. In fact, the multiplicity of funds is working against your portfolio with varied returns, pulling down the combined return of this selection.

There are three lessons for you; first invest regularly and not in lump sum. Next, invest with a goal by selecting a combination of funds that will help you achieve your goal. And finally, select good funds that are highly rated have a proven track record and history to back its performance.

If you are looking to consolidate these five funds into one multi cap fund; select from any of these 5-star rated funds—ICICI Prudential Dynamic, Quantum Long Term Equity or Templeton India Equity Income.

Scheme  VR Star Rating  3-year return (%)  5-year return (%)
UTI Dividend Yield **** 10.15 19.4
DWS Investment Opp Reg ** -3.19 17.72
Fidelity India Spl Situation **** 2.38 -
HDFC Long-term Equity Not Rated 2.19 -
Magnum Contra *** -0.47 16.47
Returns as on January 19, 2011

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