I'm a newbie and I'm trying to understand the logic of , why buying similar funds is bad.
let's say you have to decide top 5 cricket teams in the world, you can choose one team 5 times or multiple teams to fill these 5 spots. The total list of teams contains-
All international teams & All IPL teams & World X|
What are the chances, you are not taking one team 5 times?
How is it different from common holdings that different Funds have.
Let's assume four funds A,B,C,D , where A & B have many common holdings and C & D have many common holdings but A & D have no common holdings.
Why is investing 50% each in A & D considered better than investing 25% each in A, B, C & D.
Is there any reason other than the expense ratio?
let's say you have to decide top 5 cricket teams in the world, you can choose one team 5 times or multiple teams to fill these 5 spots. The total list of teams contains-
All international teams & All IPL teams & World X|
What are the chances, you are not taking one team 5 times?
How is it different from common holdings that different Funds have.
Let's assume four funds A,B,C,D , where A & B have many common holdings and C & D have many common holdings but A & D have no common holdings.
Why is investing 50% each in A & D considered better than investing 25% each in A, B, C & D.
Is there any reason other than the expense ratio?