Less is More!!
Today's Topic - Many Schemes.
After great response to my maiden blog series on Behavior and Investing, I am excited to write another series “Less is More”. Here we discuss how and why less is more?
After great response to my maiden blog series on Behavior and Investing, I am excited to write another series “Less is More”. Here we discuss how and why less is more?
I am sure, you will find it useful!!
Today we will discuss “Many Schemes”
Do you think more schemes/products are good in investing?
I know Investors who like to (over)diversify their
investments into many schemes on principal of never put all eggs in one basket.
I do not agree to more schemes! Many schemes are usually
chaos!
Broadly there are 4 asset classes. Debt, Equity, Property
and Gold.
As an Investor, your starting point has to be deciding
percentage allocation of total net-worth into these 4 asset classes. You should
not burst this ratio at most point of times. While making asset allocation
chart, consider having more of financial assets (like FDs, Debt, Mutual fund,
stocks etc) rather than physical assets –like property and gold. Property is
illiquid is nature, has high maintenance and transaction cost (stamp duty, registration,
GST, up-keeping, brokerage etc.) Gold is a good hedge for portfolio and
inflation but, you shouldn’t go beyond 10-20% depending upon ethnicity and time
horizon (gold cycles can be 10 years long also wherein you make no returns and
your patience can be tested)
Consider below points
1)
Too many products/schemes meaning too much of
spread. Foot in many boats.
2)
Many products meaning low conviction of your
advisor or yourself.
3)
It’s observed that over diversification leads to
inefficiency in returns.
4)
If you don’t invest meaningful monies, you lose
out on meaningful gains too.
5)
Reviewing too many product performance is
cumbersome.
6)
Exiting also takes time and effort.
7)
Maintaining record and data management is also
challenging. Like checking contact details, Bank details, tracking
dividend/redemption payment.
8)
Its mammoth task when it comes to transferring
investments from deceased person to surviving member and nomination hassles.
If you have many stocks in your portfolio or you have
invested in many Mutual Fund schemes. You must have experienced what I have
mentioned herein.
Keep it simple. Have few schemes
in portfolio. There is no ideal number of schemes but 10-15 are maximum that
one can go with. Look for schemes that gives you true flavour of all market
segments. Review performance with the help of advisor and if required switch
the poor performing scheme to high conviction idea. That’s it!!
If you are holding too many schemes or stocks in your
portfolio, and wish to make slim and smart portfolio? Do contact me at
9833778887 or wealthcarein@gmail.com
If you find our blogs helpful, pls do like, share and
comment
Author –
Bhavesh D
Damania
Founder -
Wealthcare Investments
EduPrenuer,
TV show panellist and Blogger
"Risk comes until you know what, where and why you are
Investing"
Disclaimer: We respect all individual approaches. Sole objective of
this series is to burst a few myth in Investing. There could be genuine reason/experiences
and “less is more” may not be appropriate. Investor must consult own advisor to
figure out right approach before adopting any of these suggestions.
No comments:
Post a Comment