The Drawbacks of Having Multiple Folios with One Fund House

Most financial advisers will agree that a good way to invest lump sum amounts in equity funds is through systematic transfer plans (STPs) in which you invest a lump sum in a liquid fund and transfer some portion of it to equity funds from time to time.

Multiple-Folios-with-One-Fund-House

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It goes without saying that the funds have to be from the same fund house. However, they need to be in the same folio as well. For instance, you have made investments in SBI Liquid Fund (SLF) in folio number 100, and SBI Equity Fund (SEF) in folio number 200. Now, if you want to transfer money from SLF to SEF, then it’s natural to assume that the funds are simply moved in one transaction. However, that’s not really what happens. The fund house makes a new investment in SEF for you instead. So, you end up with three individual investments:

  • Original investment in SLF in folio 100
  • A new investment in SEF in folio 100
  • Original investment in SEF in folio 200

If you have a large number of folios use STPs often, then you can end up so many investments that management and paperwork can become a nightmare. However, you can solve this problem through consolidation.

Consolidation of Folios

The easiest way to improve mutual funds management is to consolidate your folios (a repository that contains all your investments) with a fund house.

To get started, you can try to stick with just one financial advisor as it will minimize the number of account statements that you will receive. You can also merge folios only with the identical holdings.

The mode of holding should also be the same. So, if a folio has an “either or survivor” mode, then you cannot merge it with a folio that has a “joint” mode.