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Avoid Overlapping Funds

With similar kinds of funds, a portfolio gets multiplicity of the idea but no diversification…

I am 36 and my monthly income is Rs 50,000. I want to invest Rs 10,000 in mutual funds through SIPs and have selected HDFC Equity, HDFC Top 200, IDFC Premier Equity, BSL Dividend Yield Plus and ICICI Prudential Discovery Fund. I am new to mutual fund investing.
- Rama Chandra Sethi

Schemes  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
BSL Dividend Yield Plus Mid & Small Cap ***** 20.09 14.26
HDFC Equity Multi Cap ***** 17.45 15.95
HDFC Top 200 Large & Mid Cap ***** 14.68 15.63
ICICI Prudential Discovery Mid & Small Cap **** 20.14 11.68
IDFC Premier Equity Plan Mid & Small Cap ***** 14.46 18.51
Returns as on June 16, 2011 Ratings as on May 31, 2011

You have selected good funds to build a portfolio. However, with three mid- and small-cap funds in the portfolio, there is multiplicity of the idea, which does not add to portfolio diversification which is necessary for long-term wealth creation. You can consider reducing the mid- and small-cap holding and adding a large-cap fund such as DSPBR Top 100 Equity or Franklin India Bluechip to add stability to the portfolio and diversification. Continue investing regularly in the selected funds and monitor its progress regularly.



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