Mutual Fund – Series

How to choose a mutual fund is always been a big question in front of the investor. The generic answer that every body provides is it depends upon the intension and purpose of the investor. It holds true in the circumstances when you have the series of asset managing companies starting from AIG, AXIS, BARODA, BHARTIAXA, BIRLA, BNP, CANARA, DAIWA, DEUTSCHE, DSP, EDELWEISS, ESCORTS, FIDELITY, GOLDMAN, HDFC, HSBC, ICICI, IDBI, IDFC, IIFLINDIABULLS, ING, JM, JPMORGAN, KOTAK, LIC, NOMURA, LNT, MIRAE, MORGAN, MOTILAL, PEERLESS, PRAMERICAPRINCIPAL, PNB, QUANTUM, RELIANCE, RELIGARE, SAHARA, SBI, SUNDARAM, TATA, TAURUS, TEMPLETON, UNIONKBC and UTI ,all the asset management companies run a various category and schemes of mutual funds under them from Large-cap, Liquid, Ultrabond, Midcap, Fixed maturity, global and sectoral funds to name a few.

As I have repeatedly said to choose a mutual fund is a difficult task because your investment horizon, need for investment is more important for the fund’s selection, you can imagine that there are thousands of different schemes running across.

In the past I already did a story on investing in mutual funds , and this one is just to give the horizon and providing the view that under the above asset manager there are series of funds that are going on and many of them closed out depending upon the purpose of the fund scheme.

Another important question is How many mutual funds do you need to have a diverse enough portfolio?
Single-fund portfolios had the highest standard deviation, delivering either the biggest gains or the heaviest losses. So owning just one fund can be a risky bet. Add a fund and the standard deviation drops significantly. Returns are lower, but the downside is less severe, too.

On an average after seven funds, however, a portfolio’s standard deviation stays pretty much the same regardless of how many funds you add. In other words, once you own seven funds, there may be no need for more.

But here again a small caveat the number of securities you own is less important than how diverse those securities are. Seven large-cap funds won’t diversify your portfolio the same way owning one large-cap fund and one small-cap fund would.

The bottom line: Don’t obsess over the number of securities that you own. Instead, concentrate on their diversity.

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