Big is bountiful in MF world

Of course size does matter. Mutual fund schemes with bigger sizes or higher assets under management have posted better returns as compared to those that are smaller in size. Bigger MFs are in a position to pay higher broking fees if they choose and thus keep on becoming larger. With size, these funds are also in a position to hire the best talent in the industry and thus these funds perform well in a longer run.
Smaller funds tend to take higher risks as compared to large funds as these funds are desperate for returns and want to make it to top 10 list in terms of returns. The top 10 holdings of these funds are very concentrated making these funds more risky than those with higher assets. Returns of small funds tend to be varying drastically from +26% to -18%.
To last in the current market smaller funds always need to bring in innovative ideas.
Getting a unique proposition is very important especially for these funds. But as smaller funds do not pay commission to the distributors and prefer to sell funds directly it is lot easier to break even for them.
Common perception is that there should not be any correlation between size and performance. Statistic data suggests that equity diversified schemes that are in the range of

Rs. 1 crore and Rs. 200 crore have an average annual return of 4.5% as compared to schemes that are bigger than 1600 crore, which have an average return of 11%. On a statistical basis there is a positive correlation of 75% between size and performance. Higher the size better the performance.

overweighing in high risk, non-diversified funds

Casino effect: winning big loosing big

Very large percentage of risk does not justify the potential reward. The risk is highly disproportionate to overall profit potential.

High risk, non-diversified stock fund category includes domestic and foreign small-cap growth, emerging markets and sector funds. The bond fund category includes emerging markets and certain high-yield funds bearing high risk.These fund types can be appropriate in many portfolios, provided an investor adheres to the principles of effective diversification.

Investor should have different funds with distinct risk/reward objectives within a variety of fund types and reduction in overall risk.

There needs to be percentage limit over acceptance level of high risk, non-diversified funds in investor’s portfolio. Most recommend between 5-30% of total portfolio assets, depending upon choices of aggressive, moderate or conservative risk tolerances.

Letting these high-risk, non-diversified mutual funds not to be a core part of your portfolio but just to be a suitable portfolio supplement is a key.

Some funds run the risk of eroding your capital!!

Thematic funds

Thematic funds invest in a theme rather than in a single sector. So while the fund manager's investment options remained restricted to the theme, he still has several sectors to choose from within that theme. A theme like infrastructure for instance, has several related sectors like cement, steel, capital goods/engineering.
When it comes to stock-picking, this gives the fund manager more flexibility when he is managing a thematic fund as compared to a sector fund. However, that is not to say that thematic funds make prudent investments. At the end of the day, a theme imposes a restriction on the fund manager and goes against the principle of diversification, the cornerstone of mutual fund investing.

We can't think of a single theme that is so enduring that it will make the fund manager forget every other theme till the time that fund is in existence. When that theme runs out of steam (and it will some day!), the fund manager will wish he was managing a 'true blue' diversified equity fund. The investor will certainly wish for that, even if the fund manager doesn't!
Your diversified equity fund manager will in all likelihood be upto the task of identifying the theme, and the good thing for you is that he will also be able to exit from the theme when it fizzles out. Unfortunately, the 'thematic' fund manager will not have the same luxury.

some funds run the risk of eroding ur capital!!

Sector funds

Sector funds or sector-specific funds have a mandate to invest in just one sector like FMCG, technology/software, pharma etc. single sector funds are extremely difficult to manage once the rally in that sector fizzles out.

They may get caught wrong footed when the market rally runs out of steam. Their NAV at one stage may drop to such a bottom-rock price where from it shows no sign of recovery even to it’s earlier issue price! Remember K Tech's NAV?

One of the reasons why sector funds get promoted among investors is the lure of high return and the second is hefty commission mutual fund agents are promised with for meeting their sector fund targets.

Avoid sector funds, unless you have a view on the sector and know exactly when to invest in it and exit from it. Sector funds are high risk investment avenues and over the long term (3-5 years) they rarely outperform well-managed diversified equity funds.

WAY IN AND WAY OUT

Funds offer poorer protection on the downside than before. This means a buy-and-hold approach works for only a few funds and you would have to be lucky to choose the right funds all the time. Most funds appear reluctant to shift their holdings to cash, though they sense a market peak, for fear of an opportunity loss.

They tend, however, to make hefty dividend payouts, which could be used as a trigger to sell a portion of your holdings. As a matter of caution, always invest in equity only money that you do not require for the next five years.

What is ur best portfolio?

Choosing your investment mix depends on factors such as your risk appetite, time horizon of your investment, your investment objective, your age etc. Consultation with designated bank branches, fund house service center or any professional financial advisor is must. Here is how the mix of equity and debt products in your portfolio is supposed to change as your age increases.

Age band of 21-25 is a time to know investment objectives, to know how market plays............