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Are all your investments with one AMC or Mutual Fund House?

Quite often, in our day to day life we try and make things convenient for ourselves. May it be shopping, travelling or at work, our brains are on a constant look out for the convenience factor in everything we do. And in doing so we totally disregard the fact that many a times if we had put in that extra bit of effort in whatever we do, we could have gained much more value.

 

This attitude of making things convenient gets us into the habit of creating comfort zones around ourselves. And once a person is in a comfort zone, he or she almost completely loses the ability to think out of the box or take challenges or just do something different and better.

 

And very often this habit of "convenience shopping" is also quite visible the way most of you invest your hard earned savings as well. Let's talk about mutual fund investing here.

 

Many of you investors are in the impression that investing in schemes of a single Asset Management Company (AMC) saves a lot of cost. This is absolutely a myth. Your investment in different mutual fund schemes from a single AMC does not reduce your costs at all. In fact having a concentrated exposure to only one AMC may prove to be harmful to your portfolio.

 

Let us see how a concentrated portfolio consisting schemes from a single AMC affects you adversely:

 

1.               One man show may not last for long

Investing in multiple schemes of a single AMC under the pretext that a "Star Fund Manager" is managing the schemes may prove to be disastrous for your investment portfolio. Say for example, you have invested in a few schemes from a single AMC for a period of 5 years. But to your surprise at the end of the second year, the so-called "Star Fund Manager" quits that AMC and joins elsewhere.

This might bring shivers down your spine. A new fund manager might just change the way a fund is managed which may or may not be fruitful for your investments. At this juncture you might argue saying that "I will follow my fund manager wherever he goes".

Well it may not be always possible for you to chase down your "Star Fund Manager". What if your "Star Fund Manager" does not pursue fund management profession anymore?

Hence, investing in multiple funds of a single AMC under the pretext that a "Star Fund Manager" will boost your fund's performance is truly a myth and nothing else.

2.               What if the single AMC goes bust?

Any problem at the AMC level might just trickle down and affect the performance of all the schemes in your portfolio. Now-a-days we come across various scams being unearthed. And if you are unlucky to have your AMC being hit by scams, then be ready to lose all your money. There also have been cases of front-running by some unethical people in the fund management teams, wherein they pass on restricted (price sensitive) information to other people in order to make a quick buck.

3.               Investment systems and processes

If your investments are well diversified amongst mutual fund schemes of different AMCs you are in a much better position to take advantage of diverse set of investment systems and processes which the AMC follows in order to make their investments. Diverse investment systems and processes followed by different AMCs helps you to have exposure to a diverse set of companies which in turn makes your portfolio less risky. The risks are diversified as you have exposure to multiple sectors in different proportions.

Unlike the above, if you have all your eggs (investments) in one basket, you will not be in position to reap the benefits of diverse investment systems and processes followed by different AMCs.

4.               Concentration risk

Well, we all know 'too much of anything is bad'. But still some of you investors ignore this idiom while making your investment decisions. Remember having all your money parked with just one AMC may make you susceptible to concentration risk which in turn might adversely affect your portfolio performance.

Hence, the next time while making any investment decisions please take into consideration the above mentioned points and refrain from putting all your "eggs" (investments) in one basket (AMC). Remember, doing convenience shopping while investing can actually disappoint you!

 

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