 Learn how to tackle risk through diversificationPublished on Mon, Aug 14, 2006 at 11:47 | Source : Moneycontrol.com Updated at Thu, Aug 31, 2006 at 13:35 Like this story, share it with millions of investors on M3
The mixed MFs route To make the portfolio more suited to our needs and invest across fund houses, we could go in mixed schemes such as MIP or Balanced mutual funds. Herein the corpus gets invested in individual stocks and bonds based on the allocation percentage. You could, for example, invest in a balanced fund where 60-65% of the corpus gets invested in individual stocks and the balance 35-40% in different bonds. Under this approach, we have more flexibility than a single fund-of-funds. Also the overall expenses will usually be lower. But, depending on the exact mix, it may not be as tax efficient as a fund-of-funds. Moreover, we would have to separately choose and manage a mix of such MIP & Balanced funds.
In a step further to the previous route, we choose different dedicated equity and debt funds, instead of mixed funds. The benefit of course is higher degree of flexibility to construct a portfolio more in line with our needs. By choosing different funds covering different sectors in the market, we can achieve a high level of diversification across entire market - both debt & equity. (Also read - How to handle volatile markets?) But the drawback is a further increase in the number of individual funds we need to invest in and manage. Also, at the time of portfolio rebalancing, we could end-up with a higher tax-outgo vis-à-vis the aforesaid first two routes. Given these various routes available, we can choose the one, which suits us the most from the perspective of time, knowledge and efforts that we can devote to managing one's finances. - Sanjay Matai The author is an investment advisor and can be reached at sanjay.matai@moneycontrol.com. For more Views by Experts click here
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Tags: debt, equity, real-estate, gold, Bank FD, NSC, KVP , PPF, fund-of-funds , asset allocation, MIP, Balanced, Sanjay Matai |
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The dedicated MFs route
