Explained: Diversification between different Mutual Fund schemes & AMCs
What is diversification in the context of investment planning?
Diversification is one of the important tools of investment planning because it helps to reduce the overall risk in your portfolio. As you know, it is very important to diversify your portfolio into various asset classes for the sole reason that not all the assets move in the same direction. In case you have a good risk appetite and have already invested in equities, you should also get exposure to other asset classes like Gold, Debt, FDs, PPF, PF or Real estate in order to reduce the overall risk of just having one or two asset classes and a potential threat to your portfolio returns if that asset class does not perform. This however, has to be done prudently based on your goals, risk appetite and overall financial assessment.
What is diversification with respect to mutual funds and the goal it should achieve?
To put it simply, diversification with respect to mutual funds investments is nothing but deciding which MF schemes to invest in like debt funds or equity funds and then further diversification in terms of selecting large cap, mid cap, small cap or a sectoral fund to serve the main purpose of …read more