Is 6 mutual funds too much?
Bhatt advised, “Investing in too many mutual funds can lead to over-diversification, which can actually reduce the potential returns of your investment portfolio. Diversification is important to manage risk, but when you have too many funds, it can lead to a dilution of returns.”
Debt Mutual Funds
Compared to equity funds, they carry a relatively lower risk and offer a steady income stream. Depending on their investment goals and risk tolerance, investors should strive to build a diversified portfolio of 3 to 5 debt mutual funds comprising a mix of short- and long-term funds.
Too Much of Mutual Fund Investment
You must remember that each equity fund you invest in has at least 50 stocks. If you hold, say, 7 to 10 of these equity funds, you are in actual fact, investing in around 500 stocks on the high side. This figure could go higher, depending on your distinct number of funds.
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. Mid Cap Mutual Funds: Up to 2. While you might get higher returns, the risk you expose yourself to is also higher.
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.
Specifically, a fund is prohibited from: acquiring more than 3% of a registered investment company's shares (the “3% Limit”); investing more than 5% of its assets in a single registered investment company (the “5% Limit”); or. investing more than 10% of its assets in registered investment companies (the “10% Limit”).
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.
(You must convert the rate of return to the monthly figure through dividing by 12). You also have n = 10 years or 120 months. FV = Rs 1,84,170. So, the future value of a SIP investment of Rs 1,000 per month for 10 years at an estimated rate of return of 8% is Rs 1,84,170.
Diversified management investment companies have assets that fall within the 75-5-10 rule. A 75-5-10 diversified management investment company will have 75% of its assets in other issuers and cash, no more than 5% of assets in any one company, and no more than 10% ownership of any company's outstanding voting stock.
Considering 8% returns, an investment of Rs 50,000 can fetch you Rs 2,33,051 in 20 years. Not suitable for long-term wealth creation or investors with a high-risk appetite.
How many funds is too many in a portfolio?
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.
If you were to invest Rs 1,000 per month into an equity SIP over a span of 30 years at 12 per cent per annum, you would have invested only Rs 3.6 lakhs. However, your portfolio's value would have grown to an impressive Rs 34.9 lakhs.
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.
One should invest across various categories of companies/mutual fund schemes. This diversification should also be implemented across various mutual fund houses/sectors. The broad categories for equity investing are Large Cap, Mid Cap, and Small cap. One should invest in all these categories.
The 80% investment policy requirement also applies to names suggesting that a fund's distributions are tax exempt. The current Names Rule, however, does not apply to fund names that suggest a particular strategy or policy (e.g., growth or value). As amended, the Names Rule aims to fill this perceived gap.
- Returns Not Guaranteed. ...
- General Market Risk. ...
- Security specific risk. ...
- Liquidity risk. ...
- Inflation risk. ...
- Loan Financing Risk. ...
- Risk of Non-Compliance. ...
- Manager's Risk.
Mutual funds are largely a safe investment, seen as being a good way for investors to diversify with minimal risk. But there are circumstances in which a mutual fund is not a good choice for a market participant, especially when it comes to fees.
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.
If you Invest in SBI Small Cap Mutual Fund thru SIP of Rs 1000 per month for 20 Years or 240 months then your Expected Fund value at the end of the 20 th Year would be Rs 24,38,856.38 approx.
We will use the lumpsum calculator to figure out the estimated returns. If the investor wants to use his Rs. 10,000 for wealth creation and has a high-risk appetite, he can triple his investment in 10 years. If he wants to keep a balance between equity and debt, he can still double his investment.
What if I invest $10,000 every month in mutual funds?
It has given 25.96 % annualised returns in ten years. The calculator shows that a monthly SIP of ₹10,000 in this fund could have grown to approx. ₹57,53,702 in ten years. The mutual fund calculator shows how a lumpsum investment of 1 lakh grew more than five times in ten years.
The mutual fund 15x15x15 rule simply put means invest INR 15000 every month for 15 years in a stock that can offer an interest rate of 15% on an annual basis, then your investment will amount to INR 1,00,26,601/- after 15 years.
Mutual funds are an excellent option if you want an easy way to diversify your holdings (i.e., set-it-and-forget-it) or don't have the time, interest, or expertise to research companies, pick individual stocks, and manage your portfolio.
A number of factors determine whether an expense ratio is considered high or low. A good expense ratio, from the investor's viewpoint, is around 0.5% to 0.75% for an actively managed portfolio. An expense ratio greater than 1.5% is considered high.
Length of Investment
For example, an investor who holds their portfolio for 10 years will put $60,000 into it (10 years of investing x 12 months per year x $500 per month), while an investor who holds the same portfolio for 20 years will contribute $120,000 worth of capital.