Jun 03, 2017 3 min read

How Many Mutual Funds Should You Buy for Your Portfolio?

Here’s how you can add the right number of funds in your portfolio.
Do you have a question in mind regarding the number of funds you need in your portfolio? Have you ever tried to get its solution? If not, then you may lose your investment’s worth. The reason being is that it is quite essential for everyone to know how many funds they can opt to invest at a particular time.

Although the answer to this question varies as per the situation, there are some common parameters one can consider to get a solution for oneself. Here are the points to be kept in mind before deciding the number of funds for a investment:

If the Invested Amount is Less

Though this is not influential for your portfolio, considering it would be better for a practical decision, especially for the small or retail investor. If you have a small amount say Rs.1000 or Rs.2000 to invest every month, you cannot have an asset allocation in different sectors, categories or assets, rather have an option to invest in one or two funds.

So if you have a single-fund portfolio, you must make the choice of the scheme as per your investment tenure and should opt for a safer plan instead of going with a small-cap, thematic or international fund. People often make the mistake of choosing a risky fund and then burn their fingers in the down market.

If the Invested Amount is Higher

If you have a greater sum of money to invest say Rs.5000 a month, then you should consider the asset allocation and diversification to choose an adequate number of funds for your portfolio.

Asset Allocation - If you wish to allocate your money in different asset classes, i.e., equity and debt, you can opt for two or more funds, or just go with a balanced mutual funds to attain the dual advantage. If you are investing in a portfolio with a goal in mind, then you must make sure that you have considered the time frame as well as your goal. However, if you have some other investments outside mutual fund in the debt and other commodities, the asset allocation shall not be a matter of concern. Else wise, asset allotment helps in hedging against risky funds.

Diversification - If you are of the thought that you don’t need to diversify your funds across different sectors, market caps or asset classes, then you can opt for some diversified equity funds for your portfolio. With this, your portfolio shall get a perfect mix, and you will not need to owe different funds for each market caps. However, if you wish to have funds across market caps in your portfolio, then you should evaluate the importance of each category of the mutual fund and compare them with your investment objective and tenure to make the best selection of funds for your portfolio.

Apart from those mentioned above, the thematic and international funds are the add-ons to your portfolio. You cannot rely completely on them but adding them with some other productive schemes will definitely help in gaining high worth over a longer tenure. It is quite essential to make the choice of the fund as per your requirements and investment objectives so that you just not earn money but achieve stability in life.

MySIPonline has a team of experts to help you assist in making the best choice for your mutual fund investments. You must get in touch with us to grab the best opportunity in the market and achieve your financial goals with ease.