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How important is it to diversify among different fund houses?

Dhirendra Kumar suggests entrusting your money with the fund managers of different AMCs.

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How important is it to diversify among different fund houses? Can we stick to just one fund house?
- Ayodhya

It is important. Once your money becomes meaningful, it is important to diversify across fund houses. But it depends on the scale of your money. If you're going to start your investment with Rs 5000, maybe it's complex to have more fund houses -just having one aggressive hybrid fund provides you with convenience.

But the moment your accumulation gets bigger, it is important to diversify simply because even fund managers go in and out of favour. Great fund managers who have been doing well for many years sometimes end up struggling for three-four years. And that's the case with most fund managers. The best fund managers go out of favour and not-so-well-known fund managers come to the forefront. So, things change. There is a churn there.

So, the moment your accumulation becomes meaningful and your real-life goals are dependent on that, it's better to diversify because you cannot bank on the skill, brilliance and luck of one fund manager only. That's the basic principle of diversification that you should not be dependent on one person's mistake. And exactly for this reason, you should have your money entrusted with more than one fund manager, once your stakes are high.