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Is it advisable to invest with just one fund house?

Spreading your investments across more than one fund house will offer you better diversification

I'm planning to start investing in mutual funds. Is it fine to invest in funds of a single fund house? Also, should I go for direct plans or through my bank?
-Sumeet Azad

From a diversification perspective, it is better to spread your investments across funds of more than one fund house. Several funds of a fund house will tend to have the same fund management and research teams and if their bets go wrong, it may potentially impact the performance of all their funds. Besides, there could be other factors such as the exit of a key fund manager which may impact several funds of that fund house. Therefore, it is always better to diversify your portfolio across fund houses too. Nowadays, you have plenty of good funds to choose from across different fund houses in almost every fund category.

Coming to your query about direct vs regular plans, the former are cheaper as they do not charge you the distributor's commissions. The difference in their expenses can be as much as 1% per year. But having said that, they are more suitable for someone who is well-versed with the mechanics of investing and is able to manage his investments independently. Given that you are a first time investor, it may not be a bad idea to invest in the regular plans through your bank. The extra cost that you pay might be well worth the hand-holding you get. A year down the line, when you feel comfortable taking charge of your investments, you can consider switching to the direct plans.

You can read our article Beginner's guide to mutual funds to know more.

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