How many mutual fund schemes should one have in one’s portfolio?
Ideally, one should not have too many schemes. Too many schemes will lead to over-diversification and limit returns. For instance, 10 large-cap schemes would mean you have invested in the same kind of stocks. Have various kinds of schemes, depending upon your profile. So, have a combination of schemes and themes. According to a Morningstar study, a mutual fund research agency, after seven schemes, the value that you add to your portfolio does not increase.
How does one decide which schemes to exit?
If you have allocated 70% of the portfolio to equities, it is advised that 25% be allocated for large-cap funds and be put in only two schemes, 35% should be in three schemes and the last 10% should be in two schemes.
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