Diversify carefully to manage portfolio well

He explained the point by using Mirae Emerging Bluechip Fund– which has given CAGR of around 25% in the last 10 years – as an example.

“If Mirae Emerging Bluechip Fund was only one of the 20 funds in your portfolio, it would have a weighting of only 5%. It may not bring any significant change to the overall portfolio despite providing great returns,” Mehta said.

Suresh Sadagopan, SEBI-registered investment advisor and founder of Ladder7 Financial Advisory, agreed and said that as with many things in a portfolio, its manageability suffers. “Invest simple but chunky, choose the right one and work with it,” he said.

Diversification Limit: Diversification should be done slowly and vigorously based on a solid asset allocation strategy.

“Investors taking 15 to 20” Fixed deposit From four to five banks and assuming themselves invested is a very common scenario,” Sadagopan said, adding that not only are they more diversified, the portfolio is too focused and without direction. It doesn’t work that way. .

To diversify well, the first thing you need to make sure is that an emergency fund is in place. “Since liquidity is the primary requirement, money can be kept in short duration debt funds, short duration debt funds, ultra-short-term debt funds and even arbitrage funds.”

The next step is to determine the asset allocation strategy as per one’s financial goals, time frame, risk appetite, tax implications etc. “The time horizon is most important. For example, if the goals are growing over the next three to four years, investments should be more debt-focused. For long-term goals, they should be allocated to slightly volatile resources-equity and real estate-linked funds,” he said.

After figuring out the rough asset allocation, the third step is to identify the type of fund to invest in.

“Let’s take equities, for example. In the retirement phase one should focus on more large-cap, hybrid-oriented funds, flexi-cap etc. But a 35-year-old investor, with a longer working life and With an appropriate risk profile to match, one can choose from mid-cap, small-cap, flexi-cap, large-cap and thematic, sectoral funds.”

Someone with a large portfolio size may consider further diversification, and it is important to choose the right category and fund so that it complements the basic asset allocation strategy.

Portfolio Size Fixing: If you are a first time investor, you should start with just three funds – a balanced fund, a liquid fund emergency fund and an ELSS for tax saving,” said Paritosh Sharma, co-founder, Psquare Corporate Advisors. However, when Many things come in handy as the portfolio gets bigger. Your investments should have low correlation. It should not have any negative correlation in particular, i.e. they should not move in the same direction.” Gold and equities form a negative correlation. Huh. , while large- and small-cap funds may have a low correlation,” Sharma said.

if anyone has ₹Sadagopan said that 1 crore portfolio, can invest up to 12 funds.

“For such a portfolio, the investor should choose a liquid fund for emergent needs. Then, for a short-term goal, he can choose an arbitrage. Also, he can look for funds with slightly higher risk for better returns like corporate bond funds. Also, he can add an income fund for the target of five-six years. A fund can be in the gold category. Then, four to five in equities. Now, when you. go from ₹from 1 crore ₹2 crores, you can add some more funds. for one ₹5 crore portfolio, one can add two to four funds on it. The investor can bring some international exposure to the portfolio, a particular fund like G-Sec in debt,” he said.

On a broad basis, a simple portfolio is easier to manage. “Keep the portfolio simple, straightforward so that it fits into one page, so you can manage everything in a time-effective manner,” he added.