Think of diversification in mutual funds like food choices. Eating the same pizza for breakfast, lunch, and dinner every day gets boring and unhealthy. But trying 50 different dishes in every single meal? That’s chaos. The sweet spot is a balanced plate, and investing works the same way.
In this episode of Moneywise, we break down the real meaning of diversification and why many investors unknowingly fall into over-diversification in mutual funds.
More funds nay not always mean more safety. In fact, the disadvantages of over-diversification in mutual funds often include unnecessary complexity, overlapping holdings, and diluted outcomes.
Through simple analogies and clear logic, we explore how to think about diversification the right way, especially for mutual funds for beginners and anyone starting mutual funds and SIP for beginners. No jargon, no hype, just a practical way to understand how balance matters more than quantity.
Because smart investing isn’t about eating the same thing forever… or trying everything at once. It’s about knowing how much is enough.
Chapters
00:00 Intro
01:11 Underdiversification vs Overdiversification
02:21 Diversification Mistakes
03:40 4 Types of Diversification
05:54 How Many Funds?
06:58 Downsides of Overdiversification
08:02 Myths Busted
09:25 Quick Recap