Have you ever thought of investing in a particular mutual fund and then be afraid of it just because of the dilemma you have regarding investing.
Every person have his/her own anxiety while making investments. Mutual fund investments is not a swift task to do, it does provide you the necessary security towards your future but volatility in the market will always be there with the outcomes. Even any investment expert cannot assume the results of the invested money.
Of course they can assume but they can never be fully sure about it. Mutual fund market has developed a lot from then and now, their are many kind of funds to invest in. What makes you a successful investor is how you choose you funds to invest your money.
Diversification is a common phenomenon related to your investment portfolio. People relate it to investing in different diverse fund which is not true.
Diversification is an investment fund that contains a wide array of securities to reduce the amount of risk in the fund. Actively maintaining diversification prevents events that affect one sector from affecting an entire portfolio, make large losses less likely. Funds are balanced with minimal risk.
So, its about maintaining the balance between the risk and the advantages in a particular fund of a company or a sector.
In order to minimise the impact that any one security will have on the overall performance of the portfolio we need to have diversification’s.
If a person can spare a good amount of money from the income then he can invest in mutual fund, Also, this doesn’t mean that a person having low income cannot invest. In market today, We have so much options available that anyone can invest irrespective of the money in pocket.
Diversification is not related to investing in 30 funds all together but investing in diverse securities so that even if the market is low in one sector, it will not have any adverse effect on the other fund of yours.
Ultimately, investor’s money will have a broader chance of cyclical inflows.
It means that you just won’t invest your entire money in a single asset class, say, equity mutual funds. One can spread investments across different asset classes based on your risk profile and investment horizon so that you are not dependent on one asset class. It will help in minimizing the potential losses.
Investors tend to forget that Mutual Funds themselves diversify their portfolios into anything from 40 to 75 stocks. Therefore, when you buy into five different Equity Mutual Fund schemes, you could potentially be investing indirectly into anything from 100 to 150 unique stocks, depending upon the level of overlap in holdings between the funds.
THINGS TO KEEP IN MIND WHILE DIVERSIFYING YOUR PORTFOLIO
- Never get carried away from 5 star rated fund. Major problem with investors lies here.
- Without knowing the basics of any fund, don’t hop onto any conclusion. Suppose, doctor have asked a person to eat oranges because he has a deficiency of Vitamin, A and the other person B is asked to eat apple, both the things are beneficial to the person but the needs are different at a point of time.
Similarly, this happens in investment. Not everyone’s goal are same, the investments depend on personal financial requirement and not what is good for the other person.
- You should be very well aware of your own objectives.
- Whenever you go for diversification, Always remember that Financial portfolios need to have things that are playing different parts. Totally dependent on one kind of investment leads in trouble.
- Give time to your investment. If you are making your portfolio diversified then don’t get restless to get the returns instantly from every asset class, nothing is certain. May be one month you are getting enough profit and the other month it’s not according to what you expected out of it.
- You need to make a rigorous analysis of how many funds will help you achieve a sound diversification.
Too many funds devalue a major attraction of investing in mutual funds. Keeping track of a large number of mutual funds completely negates this. So you need to make it small but profitable at the same time, Keeping in mind the convenience.
Disclaimer: Mutual fund Investments are subject to market risks. Please real all the scheme related documents carefully before investing.