How to Diversify Your Portfolio with Mutual Funds

Investments made nowadays are more thoughtful and strategic than those made in the past. Great legends have shared their experiences and stories, and Financial experts have invented various strategies and safe plays to make investing easy for all of us. We are going to learn deep down about one of the safest ways to invest, which will guard your investments at almost all times, “Diversification”.  

Simply put, Diversification is nothing but splitting your investment across different asset classes, sectors, investment styles, etc. During market volatility, when an asset class or investment style fund experiences a decline, the rest of the investment, which is diversified across other investment styles, helps maintain the overall portfolio performance.

Now, many investors are often confused about how and where to diversify their investments. For this, Fundsindia has introduced its renowned diversification strategy, the “5 Finger Strategy”. Let’s dive deep into the 5-Finger Strategy and level up our investment game. 

The 5-Finger Strategy is a uniquely crafted investment approach to balance diversification and long-term growth. This strategy reduces risks and maximises returns by equally distributing your portfolio across five distinct investment styles.

Our 5-Finger Strategy leverages the strengths of Quality, Value, Growth at a Reasonable Price (GARP), Mid & Small Cap, and Global investments. This powerful combination ensures you’re prepared for market conditions while securing your financial future.

The Five Fingers of the Strategy: 

1. Quality: Invest in high-quality, stable companies with strong fundamentals that offer reliable long-term growth.
2. Value: Buy undervalued stocks and benefit as they reach their true worth over time.
3. GARP: A hybrid of growth and value investing, focusing on affordable growth opportunities.
4. Mid/Small Cap: Unlock the potential of high-growth mid-sized and smaller companies.
5. Global: Diversify internationally to capitalize on opportunities beyond India.

Why Choose the 5-Finger Strategy?

Over the last 5+ years (since Jan-2020), this strategy has consistently outperformed the benchmark:

Superior Returns: 20.4% annual returns vs. 17.9% for Nifty 500 TRI, a 2.6% annual edge (i.e 30% absolute outperformance).

Wealth Multiplier: ₹1 crore grew to ₹2.74 crore, compared to ₹2.44 crore with the Nifty 500 TRI.

Lower Risk: Declined less than the benchmark in 4 out of 5 years.

Consistent Outperformance: Outperformed the benchmark in 4 of the last 5 years (>30% returns in 3 out of 5 years)

Effective Diversification: Balanced across investment styles with minimal overlap.

Who Should Use the Five-Finger Strategy?

• Investors seeking long-term wealth creation.
• Those looking to reduce risks through smart diversification.
• Individuals who want a balanced and well-rounded portfolio.

Now, let’s take a look at what the 5-Finger Strategy could do for your portfolio. The result may shock you…

In 10 years, a ₹10,000 monthly SIP grows to ₹88.14 Lakhs with the 5 Finger Strategy, compared to ₹54.34 Lakhs with Nifty 50 and ₹61.94 Lakhs with Nifty 500!

As we learned before, diversification with the 5-Finger Strategy has worked best during Market Volatility. Check for yourself the Superior Performance of the 5-Finger Strategy.

European Debt Crisis (2010-2011): -18% vs. -27% (Nifty 50 TRI) and -31% (Nifty 500 TRI).
Global Stock Market Selloff (2015-2016): -9% vs. -21% (Nifty 500 TRI).
Covid-19 Crash (2020): -28% vs. -38% for both Nifty 50 and Nifty 500.

The 5-Finger Framework has been proven to outperform Nifty indices and safeguard your investments during market downturns. 

Let us give Stability and Growth to our investment journey!

Are you using the 5-Finger Framework for your investments?

FundsIndia have their hand-picked 5 funds for each investment style, which are readily available for our investors. Sign up with FundsIndia now, if you haven’t already done so.

And outperform with FundsIndia. Let us help you master your investments. 

Need help building your portfolio? Talk to our advisor today.