Diversification is the other panacea commonly suggested in leading personal finance publications. Too many “experts” take the concept of diversification too much to heart (in my opinion, it’s all a result of high-fee business education). For example, in a recent issue of Mutual Fund Insight, the “experts” often asked “Why the reader had chosen to invest in two mutual funds from the same fund house?” And their recommendation was, “Diversify. Diversify. Diversify. You are not supposed to own more than one mutual fund from the same fund house. That’s taboo.”
Well, why not? Consider these specific mutual funds.
- HDFC Top 200 Fund (Growth).
- HDFC Equity Fund (Growth).
- HDFC Prudence Fund (Growth).
- HDFC Monthly Income Plan Long-Term Plan (Growth).
Perhaps these are the best mutual funds ever seen in the Indian Capital Markets. Not having a combination of these exceptionally managed mutual funds in your portfolio just because of the reason to diversify just doesn’t make sense. You could argue vehemently that all of these funds are managed by a single fund manager and hence there arises the need to diversify. My argument is that if this fund manager has stuck around managing these funds for so long there’s no reason not to believe that he will continue to do so. Worrying about the fund manager’s employment prospects shouldn’t find a place in your list of worries.
And where does “diversification” end? Fund House, Fund Manager, Large-cap, Mid-cap, Small-cap, Multi-cap, Index, Sectoral, Thematic, Distributor, Fund Launch Date, — you can’t diversify for every silly reason in this world.
All said and done, it’s really OK to have more than one mutual fund from the same fund house. Just pick the right fund house — that’s a better advise, but I’m not an “expert.” You wouldn’t want to have all your eggs with the wrong goose right? But all your eggs with the right goose can hatch wonders.
That’s my “expert” take.
What do you think?