How many funds to have in a portfolio? (2024)

Wealth managers believe investors should diversify their mutual fund portfolios across various asset classes like equity, fixed income and gold, in such a way that they can reach their financial goals. This would mean adding more than one scheme to their portfolio.


Investors have various life goals and objectives, which need to be reached over different periods. To reach these goals one would require different asset classes like equity, fixed income and gold or a combination of them. Hence portfolios need to be diversified across asset classes and different schemes.

Every scheme has a different utility in an investor’s portfolio. For example, to meet your emergency needs you would invest in a liquid, ultra-shortterm fund or arbitrage fund; to pay for children’s education one year down the line or plan for a holiday that is 1-2 years away, you could invest in an equity savings fund. If you intend to tuck away money safely for say five years down the line, you may use a target maturity fund, while a gold fund would be used as a hedge against inflation. On the equity side, one could invest in a small-cap fund to generate alpha and meet goals that are 10 years away, while to save tax under Section 80 C of the Income Tax Act, there are ELSS funds. To allocate to large-cap stocks, one could use a passive index fund. Investors confident about a particular broad theme and confident of timing the market will invest in a technology fund or a thematic fund like a business cycle fund, while those looking for international exposure to geographically diversified portfolios will buy a US-based or Nasdaq fund. All these lead to investors owning more than 1-3 schemes in their mutual fund portfolios.

Financial planners say it is difficult to put a cap on the number of schemes in an investor’s portfolio, as investors increasingly use mutual funds to meet both long-term and short-term goals. However, they feel investors should restrict themselves to 10 schemes, as a higher number is difficult to monitor and manage. One way to have a lower number of schemes in portfolios is to check on overlaps with a similar scheme. For example, if an investor has a large-cap scheme in the portfolio, s/he should look at how high the overlap is before adding a flexicap fund or another largecap fund or an index fund. A high overlap indicates that there is no benefit of diversification and will not lead to any extra returns to the portfolio.

How many funds to have in a portfolio? (2024)


How many funds to have in a portfolio? ›

While there is no precise answer for the number of funds one should hold in a portfolio, 8 funds (+/-2) across asset classes may be considered optimal depending on the financial objectives and goals of the investor. Further, higher allocation of portfolio to the right fund is of crucial importance.

How many funds make an ideal portfolio? ›

Unless you are very well versed with the markets and have expert knowledge about mutual funds, a good rule of thumb would be to own: Large Cap Mutual Funds: Up to 2. Maybe 3 at best. Beyond that, it doesn't make sense as there will be a great overlap in the shares owned by your mutual funds.

How many funds do I need in my portfolio? ›

Financial planners say it is difficult to put a cap on the number of schemes in an investor's portfolio, as investors increasingly use mutual funds to meet both long-term and short-term goals. However, they feel investors should restrict themselves to 10 schemes, as a higher number is difficult to monitor and manage.

Is 30 stocks too many in a portfolio? ›

Typically people are advised to diversify their portfolio of stocks by investing in 20–30 companies. Doing this limits the downside risk should certain companies perform badly. Some people invest in 50 stocks while others invest in 5.

How many funds should you be invested in? ›

You should therefore only keep as many funds in your portfolio as you're comfortable monitoring. For example, if you hold 10 or 20 different funds, you'll need to keep a close eye on the changing value of all these investments to make sure your asset allocation still matches your investment goals.

Is 10 mutual funds too much? ›

The rest 60-70% should be to large caps. There is no one right answer to questions like how many funds should I invest in. But just adding new funds to the portfolio to 'diversify' or reduce risks doesn't work. So, in general, having 1-2 schemes in the chosen fund category would be sufficient.

What is a typical 3 fund portfolio? ›

A three-fund portfolio is a portfolio which uses only basic asset classes — usually a domestic stock "total market" index fund, an international stock "total market" index fund and a bond "total market" index fund.

How much money do I need to invest to make $1000 a month? ›

Reinvest Your Payments

The truth is that most investors won't have the money to generate $1,000 per month in dividends; not at first, anyway. Even if you find a market-beating series of investments that average 3% annual yield, you would still need $400,000 in up-front capital to hit your targets. And that's okay.

What is the ideal stock portfolio? ›

The more equities you hold in your portfolio, the lower your unsystematic risk exposure. A portfolio of 10 or more stocks, particularly those across various sectors or industries, is much less risky than a portfolio of only two stocks.

Is it OK to invest in only one mutual fund? ›

One should invest across various categories of companies/mutual fund schemes. This diversification should also be implemented across various mutual fund houses/sectors. The broad categories for equity investing are Large Cap, Mid Cap, and Small cap. One should invest in all these categories.

Is owning 100 stocks too many? ›

It's a good idea to own a few dozen stocks to maintain a diversified portfolio. If you load up on too many stocks, you might struggle to keep tabs on all of them. Buying ETFs can be a good way to diversify without adding too much work for yourself.

Is it OK to have 100% stocks in my portfolio? ›

New paper suggests a portfolio of 100% stocks is better, even in retirement. The paper suggests the volatility fears of relying on stocks in retirement is overrated and outweighed by their consistently higher returns over bonds. Bonds also tend to get smashed at the same time as stocks, but take way longer to recover.

How many stocks does Warren Buffett own? ›

Among the 45 stocks Berkshire Hathaway holds, the top 10 represent about 87% of the company's holdings. Here's a rundown of Buffett's 10 largest holdings based on Berkshire Hathaway's most recent 13F filing, filed Feb. 14, 2024.

Is $10,000 invested good? ›

If you invest $10,000 and make an 8% annual return, you'll have $100,627 after 30 years. By also investing $500 per month over that timeframe, your ending balance would be $780,326. Exchange-traded funds (ETFs) and mutual funds are both excellent investment options.

How many S&P 500 index funds should I invest in? ›

How many S&P 500 index funds do I need? S&P 500 index funds will be nearly identical to one another in terms of their performance and their holdings, or the particular stocks held within the fund. Investing in multiple S&P 500 index funds will not necessarily further diversify your portfolio.

What is the 3 1 rule in investing? ›

Many real estate investors subscribe to the “100:10:3:1 rule” (or some variation of it): An investor must look at 100 properties to find 10 potential deals that can be profitable. From these 10 potential deals an investor will submit offers on 3. Of the 3 offers submitted, 1 will be accepted.

Is a 3 fund portfolio good? ›

The three-fund portfolio is lazy investing at its best. It's simple, it's proven to have a better long-term track record of gains than picking single stocks and trying to time the market, and it lets you generally "set it and forget it" when it comes to saving for retirement.

Is the 3 fund portfolio good enough? ›

The three-fund portfolio is a sound investing approach, and you can't go wrong with it. If you set up asset allocation appropriate for your age, a three-fund portfolio will most likely perform well. I say "most likely" because nothing is guaranteed with investing, but this strategy is one of the safer options.

What is the 5% portfolio rule? ›

The Five Percent Rule is a simple strategy that involves investing no more than 5% of one's portfolio in any single investment. This approach is based on the principle that by limiting the exposure to any one investment, investors can reduce the risk of significant losses.

What does a 70 30 portfolio mean? ›

With a 70/30 investment portfolio, 70 percent of your capital is invested in stocks, and 30 percent is invested in fixed-income products, such as bonds, CDs, and fixed-income exchange-traded and mutual funds.

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