How to earn better returns from your MF portfolio
Pick up any mutual fund portfolio of an active investor and you will usually find it plagued with typical problems. If we can understand, identify and rectify these common blunders, we can make much better returns out of our money.
June 18, 2009 / 03:50 PM IST
Pick up any mutual fund portfolio of an active investor and you will usually find it beset with typical problems. These can affect the overall performance. If we can understand, identify and rectify these common blunders, we can make much better returns out of our money.
A bloated Portfolio
Many people have the habit of collecting funds. Over time, therefore, you will find such portfolios having 40-50 funds. Diversification is good, but over-diversification is not.
Firstly, a large portfolio would mean that some funds in the portfolio will always be below-average, thus dragging down your total returns. Secondly, even with all the support of the computers and specialized websites, it is not possible to effectively manage a large portfolio. This again is going to impact the performance on the whole.
One should, therefore, have a limited but power-packed portfolio. The idea is to extract maximum punch with minimum cost and effort.
Chasing the Top Performers
There is too much focus on the performance and that too usually the recent one say over 3 months to 1 year. That