Hello All,
I need to invest 35k monthly in SIP for next 15 years divided among large, mid, small , flexi cap . Can you please let me know whether this diversification is correct or should I see some other type of MF. Also , can you name the MF schemes which would include the above diversification.
Lastly , i wanted to know whether it a good choice to take mulitple MF scheme (large, mid, small cap etc) from a same MF house or should that also be diversified ?
Ans: Let's delve into a comprehensive analysis of your investment strategy and explore the best approach to diversify your SIP portfolio effectively.
Evaluating Diversification Strategy
Diversification is crucial to mitigate risk and optimize returns in your investment portfolio. Allocating your monthly SIP investment of 35k across different market capitalizations, such as large, mid, small, and flexi-cap funds, is a prudent approach to achieve diversification.
Selection of Mutual Fund Schemes
When selecting mutual fund schemes for each category, it's essential to consider factors such as historical performance, fund manager expertise, expense ratio, and investment philosophy. Choose schemes with a consistent track record of delivering superior returns and aligning with your risk-return objectives.
Large-Cap Funds
Large-cap funds invest in established companies with stable earnings and market capitalization. These funds offer stability and lower volatility, making them suitable for investors seeking capital preservation and steady returns over the long term.
Mid and Small Cap Funds
Mid and small-cap funds focus on investing in mid-sized and small-sized companies with high growth potential. These funds carry higher volatility but offer the opportunity for significant capital appreciation over the long term. They are suitable for investors with a higher risk appetite and a longer investment horizon.
Flexi-Cap Funds
Flexi-cap funds provide flexibility to invest across companies of varying market capitalizations based on market conditions and fund manager discretion. These funds offer a balanced approach by combining the benefits of large-cap stability and mid/small-cap growth potential. They are suitable for investors seeking a diversified portfolio with dynamic asset allocation.
Importance of Fund House Diversification
While diversifying across different market segments is crucial, it's also essential to diversify across fund houses to mitigate concentration risk. Investing in multiple mutual fund houses helps spread risk associated with any potential underperformance or adverse events specific to a particular fund house.
Conclusion
In conclusion, allocating your monthly SIP investment across large, mid, small, and flexi-cap funds is a prudent strategy to achieve diversification and optimize returns over the long term. When selecting mutual fund schemes, prioritize consistency, performance, and alignment with your risk-return objectives. Additionally, diversify across fund houses to mitigate concentration risk and enhance portfolio resilience.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in