How to reduce the number of funds in your portfolio | Earn more by having the right no. of funds

Описание: It’s common for investors to have more schemes in their mutual fund portfolios than required. Some investors may have even 20-30 funds. The problem with too many funds is that they are difficult to manage, they pull down your portfolio returns and your portfolio becomes index-like.

There are several reasons why investors end up with more funds than needed. The most prominent ones are chasing performance, being mis-sold funds, overexcitement, lock-in period in some funds, among others.

How many funds should you have? Six-seven funds are more than enough for adequate diversification. To reduce the number of funds in an investment portfolio, you can apply the following strategies:

1. Assign weights to your funds: Consider exiting funds that have less than 5% weight in your portfolio and in which you have stopped investing.
2. Exit the underperformers: Use Fund Report Card on the ET Money app for that.
3. Exit duplicate funds: If you have multiple funds of the same type, you can exit the less desirable ones based on performance, volatility, etc.
4. Review funds from the same fund house: Such funds can have portfolio overlap. Assess if they do. If yes, consider exiting some of them.
5. Exit sectoral and thematic funds: Such funds can be riskier as they focus on a particular theme or sector. Go for diversified funds. You can watch a detailed analysis of these at
   • Avoid these Mutual Fund Categories | ET Money  
6. Check the number of debt funds: Debt funds are needed for parking your emergency corpus or as the debt component to rebalance your portfolio. Just liquid (or arbitrage funds) and short-duration funds can do the job.
7. Prepare a model portfolio: How would you prepare a portfolio if you were starting now? Use this model portfolio to analyse your existing portfolio.
8. ET Money Portfolio Health Check: This tool on the ET Money app can highlight what’s wrong with your portfolio.

Chapters
00:00 Introduction
01:31 Why Do Investors Have Too Many Funds?
02:32 The Problem Of Plenty
05:20 How Many Funds Should You Have?
06:43 Strategies To Reduce Number Of Funds
17:21 Conclusion