Answer Book question
Because six large-cap and flexi-cap funds all fish in the same pond. the biggest listed companies. and because each was sold to you separately by someone earning a commission on it. Six funds with the same top twenty holdings is one fund with six sets of fees. Consolidate.
Because six large-cap and flexi-cap funds all fish in the same pond. the biggest listed companies. and because each was sold to you separately by someone earning a commission on it. Six funds with the same top twenty holdings is one fund with six sets of fees. Consolidate.
A doctor in Kottayam sends Kerala Rising his portfolio: seven funds, ₹34 lakh. Overlap analysis shows five of them share 70 percent of holdings. He is paying active-fund fees for what is effectively an index with extra cost.
Diversification is about different kinds of assets and companies, not different fund names. Two funds in the same category with similar mandates add cost, not diversification.
Category of each fund Top-10 holdings overlap Expense ratios Regular vs. direct plans Exit loads and tax on consolidating
Counting the number of funds as a measure of safety.
Bank relationship managers in Kerala rotate funds to generate fresh commission. The result is exactly this.
Seven funds → three: one broad index fund, one mid-cap fund, one short-duration debt fund. Expense saving around 1 percent a year on ₹34 lakh ≈ ₹34,000/year, compounding.
Consolidating may trigger capital-gains tax and exit loads. Do it in stages, and with a registered adviser for large amounts.
Run an overlap check Identify the redundant funds Consolidate gradually, watching tax
I have ten SIPs. Is that diversification? What is an index fund?
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