When you buy mutual funds, you are actually purchasing a portfolio of securities. These securities might be stocks, bonds, REITs, derivatives, or a mix of them. There are around 1,590 mutual funds as of today, of which 441 are open-ended equity mutual funds, 349 are debt funds, 172 are hybrid funds, 254 are Exchange Traded Funds (ETF), Fund of Funds (FoFs) and gold mutual funds, and 374 are closed-ended and interval funds.
As a result, picking funds becomes a difficult process. This is exacerbated when each major category, such as equity and debt, is further subdivided into sub-categories comprising several mutual fund alternatives offered by various asset management companies (AMC). For example, in the large-cap equity mutual fund category, there are now roughly 32 choices. And there is a perception that adding more such high-yielding funds will help them achieve better gains. However, this is not the case because it would result in overdiversification.
Diversification is one of the most effective methods that help investors in lowering the overall portfolio risk. However, doing too much or too little might endanger your portfolio. Adding more funds to your mutual fund portfolio frequently results in overdiversification. The value of diversification begins to wane beyond a certain point. This is most likely the outcome of overlapping in the portfolio. As a result, in this piece, we will learn about portfolio overlapping, its influence, how to avoid it, and how to optimise your mutual fund portfolio.
What is Portfolio Overlap?
Denne historien er fra August 01, 2022-utgaven av Dalal Street Investment Journal.
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Denne historien er fra August 01, 2022-utgaven av Dalal Street Investment Journal.
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How To Invest In An Ageing Bull Market
Bull rallies (periods when stock prices rise) and bear declines (periods when stock prices fall) are natural parts of stock market cycles, but they don't follow a fixed timeline.
Should You Entrust All Your Money To A Single AMC?
If you are a market participant, you have probably heard the quote 'don't put all your eggs in one basket', which suggests diversification. Investors often focus on diversifying across categories like large-cap, mid-cap and small-cap, but they may unintentionally overlook diversification across different AMCs. The question arises: is AMC-wise diversification really necessary? Rakesh Deshmukh takes a closer look at this scenario
Wild Swings Engulf Global Equities
U.S. stock markets experienced significant volatility. An early-week rally pushed the markets to new highs, but this momentum faded, primarily due to weaknesses in the tech sector. The major indices had a mixed finish with, S&P 500 and Nasdaq closed lower, while the Dow recorded a notable gain.
U.S. Elections and China's Economy Hamper Commodities
Commodity markets experienced selling pressure in the last fortnight, driven by uncertainties surrounding the upcoming U.S. presidential elections, concerns about the Chinese economy, and increased agricultural production in Brazil.
Wealth Building For Retirement Through Mutual Funds
Retirement is one of the most crucial and lifechanging phases. It marks a period where maintaining your lifestyle becomes paramount even though your regular income stops.
Mastering Investment with Information Ratio
Information Ratio helps in navigating the complexities of the investment landscape by assessing an active fund manager's performance. And though it has its limitations, it remains an essential part of the finance industry. The article explains what Information Ratio is and how investors can use it as another tool
Plan To Be Financially Independent
Each of us aspires to be financially independent as it ensures having enough resources to be self-sufficient and control our finances.
❝Technology is the new game-changer"
With a new breed of young investors entering the financial markets, it is the use of technology that is increasingly playing a major role in how investments are done and tracked. Anand Radhakrishnan, Managing Director, Sundaram Mutual Fund, shares his opinion about how this factor is turning into a significant tool and how it will shape the strategies of his company
What If Donald Trumps?
The potential election of Donald Trump as president in the U.S. carries significant implications for the Indian equity market. It could lead to changes in the global trade dynamics, in particular affecting the Indian IT sector while also raising inflation levels and leading to yet another revision in the visa programme for Indians who want to work in the US. The article takes a closer look at what may lie in store
Sectoral Gains Make A Mark
Benchmark indices continued their uptrend, reaching new record highs, although the pace has slowed as the broader markets faced selling pressures
