Avoid concentrating risk by investing across fund houses and schemes
19-Nov-2013 •Research Desk
I have been investing in HDFC Top 200 and HDFC Equity fund since the last three-four years. Which of these funds should I continue investing in?
-Rajesh
HDFC Top 200, HDFC Equity and HDFC Prudence are among the prominent funds offered by HDFC AMC. These funds have struggled of late and most investors are looking for other options.
Few rules to follow when you invest in an equity fund -- invest in a fairly diversified vehicle -- which HDFC Top 200 and HDFC Equity are.
Most people invested in these funds looking at their impressive performance and assumed them to be diversified schemes. However, HDFC Top 200 fund HDFC Equity are suffering in a similar way because 80 per cent of their portfolio is same.
Holding three funds from the same fund house fund that are being managed by the same manager, is not a sound strategy. By investing in three funds you may have believed that your investments are diversified, but in reality you have concentrated your risk in the same stocks. You should reduce your overall allocation to HDFC funds. If you have limited amount of money, stay invested in two schemes of the AMC. If you have a large chunk to be invested, diversify across four schemes allocating 25-30 per cent to each, one of these could be an HDFC fund.
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