Recently 2 Nris asked me this often asked question. I remember Srikant doing a story on Moneycontrol sometime back regarding the same.

I come from a school of thought that ‘whatever happens in my life is because of me’. However this was before I saw some managers handling some gullible people’s portfolios.

Both these are HNI customers (mutual fund investments upwards of Rs. 3 crores in each of the cases). Both the portfolios had all the schemes in the country! I asked them for their investment list and what I got was such a long list that it looked like a download from the amfi website for the total list of equity and balanced schemes. Both had the gold schemes, but of course no etf. Not to mention the average, median and mode of the investment, but yes it was large no. of schemes. Both the investors had only signed one form, and after that they have no clue about what happened.

So …..here is…the question to all of you ‘how many mf schemes should I hold’???

well, I do not know

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  1. I think it should be between 4 and 10. Preferably around 5 or 6.
    – It gives enough diversification.
    – Things are still manageable.
    – Gives enough transactions to give you joy of handling money.
    – Saves time and money.

  2. I think it depends upon how much one is investing.Typically 8/10 funds spread across 6/7 diversifed, 2 midcaps and one liquid shud be ok.

  3. Are we really diversifying by buying multiple funds? Seeking answer to this does not bother me.

    What bothers me is: Is diversification really good for my growth seeking portfolio?

  4. Even one mutual fund scheme is sufficient if your fund manager is “Prashant Jain”.

    Even in only one scheme (HDFC Top 200) you will get diversification that’s why mutual fund is, if someone want concentrated portfolio then they can go for hedge funds.

  5. I think Diversification is more of an action because a person lacks skill/interest in putting much time to manage his money in a single thing .

    So if its mutual funds, one can put money in different funds/AMC , time frame and do some diversification on different parameters .

    I dont think one should exceed 3-4 in each category of asset class .

    Manish

  6. The title of this topic should be ” How many fund schemes should I hold and when”. When matter most because if you are young lets say in 30s then you can afford more exposure to Equity and as your age increases the exposure should be reduced to equity and increase on debt funds.

  7. 9-10 funds is a reasonable diversification. This is what I have
    done. I diversify my money in various market cap categories. And in each of the category of Equity funds, I invest in maximum of two funds across AMCs, growth/value themes. As far as Debt investments , they are in 2 funds based on the lock-in period.

    I also ensure that these schemes are not scattered in too many AMCs
    by picking up good funds from max 5 AMCs that have high AUM(atleast
    20K crores). This way I feel quite comfortable in tracking them.

    2 Large cap funds
    2 Multicap funds
    2 Mid/Small cap funds
    1 or 2 Thematic funds
    1 Ultra shorterm debt fund
    (substitute for Bank FD. Has 6months lockin)
    1 liquid fund
    (Emergency/idle cash for quick redemtion without any loads)

    Subra, I look forward your thoughts as well for your question…

  8. I believe and practice the following –
    1. I diversify accross Market caps (Large cap, mid, small, micro)
    2. I diversify across fund houses (eg. reliance, DSPBR, ICICI Pru, HDFC)
    3. Point 2 gives me auto diversify for fund managers.
    4. Mutual funds can be corelated to the index(sensex, nifty etc). So if the index moves, so will the Mutual fund. It may vary in its movements (Plus or minus) relative to the index.

    So keeping above points in mind it will be wrong to conclude that more funds will overdiversify. ofcourse I hold 8 funds for the very long term and two ELSS funds which I will redeem and eventually convert into the core 8 funds. I find that if in a up moving market 2 or 3 fund perform poor to the index, it will not affect my returns much. To track 4 funds or track 10 funds – it will almost take equal amount of your time. Maybe a few minutes more.

    So I feel anything from 4 funds to 10 funds should be ok.

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