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Ask RoboHi, I am 30 years old. My goal is wealth creation. My risk appetite is aggressive. I have investing past 3 years in ELSS funds 1. Axis LT Equity Fund – regular 3 years completed 2. Dsp Tax saver -regular- 2 years, 3. Reliance tax saver- regular – 3 years My returns are moderate for past 3 years. And I have investing in 4. mirae asset india opportunities regular – 1 year 5. Kotak select focus regular – 6 months 6. Motilal Oswal MOSt Focused Multicap 35 Fund – Regular Plan – 6 months 7. Reliance small cap – direct – 2 months 8. L&T emerging fund- direct – 2 months 9. Mirae Asset Emerging Bluechip Direct-G – 2 months Now I found that there is so much portfolio overlap between these funds 1. mirae asset india opportunities – Kotak select focus – 48% 2. Mirae Asset Emerging Bluechip – mirae asset india opportunities – 47% 3. Kotak select focus- Dsp Tax saver- 44% As I want to invest to Direct funds, now I am in confusing state which funds I have continue and which funds I need to stop. Please guide me to correct over diversification in my portfolio and reduce the funds count. thanks, Balaji Koneti
Balaji Koneti asked 7 months ago
1 Answers
Roboadviso answered 7 months ago

Thanks for posting your query.
The funds which you have in your portfolio are good funds and you should continue your investments in it. All the funds have performed pretty well in last two years and some of them have consistently performed well for past five years. There are few things which you need to look from diversification purpose.
Firstly you have two funds which are managed by same fund manager i.e Mirae Asset India Opportunities Fund & Mirae Asset Emerging Bluechip Fund. We should not invest in two funds managed by same fund manager as the stock selection process, research team are same. any wrong selection of stocks would impact both the funds. the total allocation to one fund manager should not be more than 20% of our portfolio, If you have reached that allocation then you should probably stop investing any fresh corpus in it. 
 Secondly There can be some overlap in stocks in two schemes  if the funds are large cap as there is limited no of stocks in large cap category and therefore it is necessary to have allocation to other categories of the Mutual funds . Currently your portfolio is mostly skewed towards Multi Cap funds which have major allocation to large cap stocks due to good valuations. But it is good thing looking at the current valuations matrix.
Thirdly, You have only one Mid cap fund, We should add one more mid cap fund in this category. You can look at  adding HDFC Mid Cap Opportunities Fund  in the portfolio.
You should not worry about over diversification of the portfolio. Your portfolio is well balanced to provide good returns , there can be some volatility in short term , but in long term it will defiantly  yield very good results in long run.
Happy Investing! 

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