1. Over-diversification can harm a portfolio due to:
a) Chance of it spreading too thin,
b) Assets which may not perform well, or even perform poorly,
c) Good performance of some of the other assets being neutralised too.
2. Your choice of funds should always be simple and need/goal-specific, belonging to different AMCs, and preferably from the top 5 funds with 5/10-year highest returns, so that there is least scope to churn them during your investing years.
3. Select a Balanced Equity fund for your retirement corpus (aiming for 25 times your estimated annual retirement expenses), due to their inbuilt mandated auto-balancing equity-debt mechanism.
4. Select a Multicap fund for your long-term goals (of 15+ years) to weather long-term market cycles.
5. Select a Midcap fund for your medium-term goals (of 10+years) to take advantage of windfall gains in India's vibrant economy.
6. Select an ELSS fund to avail full Sec 80C tax benefits during all your earning years (after deducting EPF and term insurance contributions).
7. Maintain an Emergency fund of 6 months current expenses in a Liquid/ Ultra-short-term debt fund/ Bank flexi-deposit for contingency needs.
8. Stop any SIPs which do not fall in the above activities, and start new SIPs in the direct plans of your new suitably selected funds.
9. Systematically redeem from all your stopped funds in the most tax-efficient manner that is possible within the new LTCG taxation rules.
10. Review and rebalance your set of funds periodically, even replace those which become really laggards during your long-term investment journey, but without increasing the type and number of funds, neither on your own nor upon any advice, for a clutter-free and happy long-term investing.
a) Chance of it spreading too thin,
b) Assets which may not perform well, or even perform poorly,
c) Good performance of some of the other assets being neutralised too.
2. Your choice of funds should always be simple and need/goal-specific, belonging to different AMCs, and preferably from the top 5 funds with 5/10-year highest returns, so that there is least scope to churn them during your investing years.
3. Select a Balanced Equity fund for your retirement corpus (aiming for 25 times your estimated annual retirement expenses), due to their inbuilt mandated auto-balancing equity-debt mechanism.
4. Select a Multicap fund for your long-term goals (of 15+ years) to weather long-term market cycles.
5. Select a Midcap fund for your medium-term goals (of 10+years) to take advantage of windfall gains in India's vibrant economy.
6. Select an ELSS fund to avail full Sec 80C tax benefits during all your earning years (after deducting EPF and term insurance contributions).
7. Maintain an Emergency fund of 6 months current expenses in a Liquid/ Ultra-short-term debt fund/ Bank flexi-deposit for contingency needs.
8. Stop any SIPs which do not fall in the above activities, and start new SIPs in the direct plans of your new suitably selected funds.
9. Systematically redeem from all your stopped funds in the most tax-efficient manner that is possible within the new LTCG taxation rules.
10. Review and rebalance your set of funds periodically, even replace those which become really laggards during your long-term investment journey, but without increasing the type and number of funds, neither on your own nor upon any advice, for a clutter-free and happy long-term investing.