Investing in companies like LIC , HDFC Mutual Fund, SBI Life insurance etc? Just think about this aspect.
Where does LIC, HDFC AMC, SBI life insurance and such companies invest?
Diversification and Minimum Duplication is one of the key elements while preparing list of investments and ensure this does not get ignored while you are choosing to invest in these companies.
Let me explain.
Mr. Shah has Reliance Industries, ITC, L & T industries, TCS, HDFC bank shares in his portfolio.
Over this also has investments in Axis Bluechip, SBI Focused fund and HDFC Top 100 mutual fund schemes in debt category and HDFC corportae bond fund, IDFC GILT fund, Kotak Ultra short term fund and ABSL dynamic bond fund under debt category.
The portfolio is big and pretty much concentrated to these funds.
Now he asked his advisor, should I buy HDFC AMC shares, SBI Life insurance , HDFC Life insurance shares and should I subscribe to LIC IPO?, and the amount is again lump sum and big.
To my understanding this should increase concentration risk and deviate from diversification basiscs and increase duplication.
Please understand, LIC of India, SBI Life Insurance, HDFC Life insurance , or any AMC (asset management co.) ,is again investing in the same companies which Mr.Shah is already having exposure to.Check the level and weightages at overall portfolio level.
Read diversifying definition carefully.
Choose carefully. #keepitsimple
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