Is it OK to have only one mutual fund?
Investing in many large cap mutual funds is not necessary. One well-chosen large cap mutual fund should be enough. Mid cap equity mutual funds invest in mid cap companies only. Mid cap companies grow at much higher rates when compared to large cap companies.
Investing in a single fund has more volatility than investing in several funds. By investing in multiple mutual funds, you can spread out the risk associated with any one fund and reduce overall volatility.
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.
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.
Stocks offer larger potential returns than mutual funds, but the trade-off is increased risk. Stocks can be a smart investment if you have a higher risk tolerance, want control over your trading decisions, and are comfortable conducting your own fundamental research or technical analysis to pick investments.
There's no magic number of funds to keep in a 401(k) or another portfolio for long-term investing. The right number of investments is one that ensures diversification but also factors in your investment approach. If you prefer low-effort investing, consider buying a single fund.
Disadvantages include high fees, tax inefficiency, poor trade execution, and the potential for management abuses.
I've seen investors with 10-12 mutual funds in their portfolio for a single financial goal. Usually, their portfolio will contain 3-4 large-cap fund, another 3-4 mid-cap funds, few random debt funds, and perhaps a hybrid fund tucked in.
S&P Dow Jones Indices' scorecard compares the performance of actively-managed mutual funds to major indices. It found that over the course of one year, 51.08% of actively-managed mutual funds underperformed the S&P 500, and 48.92% of actively-managed funds outperformed the S&P 500.
3) The Names Rule currently requires that funds with names suggesting investment in a particular type of investment, industry, country or geographic region adopt a policy to invest, under normal circ*mstances, at least 80% of their respective assets (net assets plus the amount of any borrowings for investment purposes) ...
What is the 4% rule for mutual funds?
The 4% rule is a popular retirement withdrawal strategy that suggests retirees can safely withdraw the amount equal to 4% of their savings during the year they retire and then adjust for inflation each subsequent year for 30 years.
Ideally, 6 to 8 funds are good enough to build your MF portfolio. As the size of the portfolio increases, you may invest in a maximum of 10 funds to reduce the risk of being overdependent on any particular fund or fund house. However, the funds you are investing in are across equity, debt and hybrid categories.
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.
If you want a better overall product and don't want to leave money on the table, then it may make sense for you to have multiple brokerage accounts. You'll be in a position to get the best of several brokers and can decide which broker makes sense for any given action you want to take.
With $100,000 at your disposal, you may also want to consider bigger-picture thinking in terms of your investments and include real estate options. Real estate investment trusts or REITS are an investment vehicle that includes income-producing properties such as office buildings, malls, apartment buildings, and more.
And, in general, ETFs tend to be more tax efficient than index mutual funds. You want niche exposure. Specific ETFs focused on particular industries or commodities can give you exposure to market niches.
Are mutual funds safe? All investments carry some risk, but mutual funds are typically considered a safer investment than purchasing individual stocks. Since they hold many company stocks within one investment, they offer more diversification than owning one or two individual stocks.
| Top small cap mutual funds | Annual Returns 2023 |
|---|---|
| Bandhan Small Cap Fund | 49.48% |
| Franklin India Smaller Companies Fund | 49.44% |
| ITI Small Cap Fund | 48.54% |
| Quant Small Cap Fund | 44.90% |
In this case, a good rule of thumb that still has a profound positive impact on your retirement savings is to contribute just enough to receive the full employer match. So if your employer will match up to 7% of your contributions, only contribute 7% so you can take full advantage of that extra money.
To avoid falling behind on retirement savings, Keckler suggests bumping up your 401(k) contribution by 1% of your salary every year, until you reach the annual maximum ($23,000 in 2024). In other words, if you are saving 5% of your salary, try increasing that to 6% next year and 7% the year after.
Is 6% for 401K good?
The most common employer 401K match is dollar for dollar of up to 6% of your salary³. Most financial advisors recommend contributing at least enough to get the maximum employer 401K match. But more is always better to help save the most for retirement.
- #1. BNY Mellon Corporate Bond Fund BYMMX.
- #2. Miller Intermediate Bond Fund MIFIX.
- #3. Calvert Income Fund CFICX.
Nobody can predict the market movements. Hence, instead of focusing on timing the market, one should be disciplined and should keep on investing in equity mutual funds irrespective of the market fluctuations. In the long term, these short term fluctuations do not affect your investments.
- Appreciation in the fund's NAV, which happens if the fund's investments increase in price while you own the fund.
- Income earned from dividends on stocks or interest on bonds.
- Capital gains or profits incurred when the fund sells investments that have increased in price.
| Name | Sub-Category | 5Y CAGR (%) |
|---|---|---|
| Quant Small Cap Fund | Small Cap Fund | 30.94 |
| Quant Infrastructure Fund | Sectoral Fund – Infrastructure | 28.01 |
| SBI Tax Advantage Fund-III | Equity Linked Savings Scheme (ELSS) | 27.18 |
| Quant Tax Plan | Equity Linked Savings Scheme (ELSS) | 26.82 |
