Widely read:
It is important to diversify your investments across fund houses. But it also depends on the scale of your money. If you have just started investing and have a small corpus, or have a SIP of Rs 2,000 a month, maybe it's complex to have more funds - having just one aggressive hybrid fund provides you with convenience.
But the moment your accumulation gets bigger, it is important to spread your investments across funds of more than one fund house. Diversifying across more than one fund house is important and it should not be just across multiple mutual fund schemes of the same fund house.
Several funds of a fund house will tend to have the same fund management and research teams. So, 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.
Also, great fund managers do 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 the not-so-well-known fund managers come to the forefront. So, things change. There is a churn.
So, the moment your accumulation becomes meaningful and your real-life goals are dependent on that, it's better to diversify across funds of different fund houses. Because you cannot bank on the skill, brilliance and luck of just one. And exactly for this reason, you should have your money entrusted to more than one fund manager of a different fund house.
Suggested read: Diversification: How to get it right
This article was originally published on May 04, 2022.
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