Ch.12 · Matching Schemes to Investor Profiles · medium
An investor holds five large-cap equity funds from different AMCs. Is this portfolio well-diversified?
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EXPLANATION
Large-cap funds are restricted to the top 100 stocks by SEBI categorisation. Multiple large-cap funds will have significant portfolio overlap — often 60-80% common holdings. This creates an illusion of diversification without the actual benefit. True diversification requires spreading across different asset classes or fund categories.
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