One reader asks: Everyone said I had too many funds and my portfolio resembled an expensive index fund. Is it wrong to hold so much money? If so, what should I do? ”
They are right in saying you have a portfolio of expensive index funds. The number of funds you hold is almost irrelevant. We recommend asking the following questions first:
- What am I investing for?
- when do you need money
- Do you have an investment strategy to meet this need?
- Do we have an appropriate asset allocation that balances the rewards and stability associated with risk?
- Do you understand the basics of portfolio management?
- Do you rebalance your portfolio once a year, or when your asset allocation deviates by a certain amount (say 5%)?
- How do you diversify your stock and bond portfolio?
- How many products do you need to achieve this diversification?
- Will I be an active investor and try to beat the index with my choices, or will I be a passive investor?
- If I am an active investor, how long should I wait for my fund to outperform the index?
For help, try this free e-book: Re-assemble Step by step money management basics. Once you find an acceptable answer, you can answer the following questions about your MF portfolio.
Why did you end up with 25 mutual funds?
- Have you been advised of automated services?
- Have you seen the “Top Funds” mentioned in portals or news media articles?
- Has the fund’s recent performance upset you?
- Did you read the fund’s marketing materials before deciding to buy?
- Can you measure the impact of each fund on overall portfolio risk and reward?
- Couldn’t you achieve the same result with less money?
Perhaps your instincts tell you something isn’t right when you ask the forum for your opinion on your MF portfolio. My takeaway is that you need to ask, “Have you ever planned and invested?”
If the answer is no, then you should first design your individual investment plan. This has higher priority than the number of funds held. I know many investors who have more money than you. They have a solid investment strategy so they can sleep soundly. All humans have their own quirks, and he is one of those who have little or too much money. it is of secondary importance.
So it’s better to deal with the bigger problem at hand. Once you have this investment plan, you can decide what to do with your 25 holdings. Whether you call it diversification or inversion is up to you.
- Want to reduce the number of funds?
- Do you want to continue this action and grab every shiny object you come across?
Our recommendations are:
- Now you don’t have to worry about the number of funds. Keep an eye on your asset allocation and how much you need to invest for your future needs. Track if you can invest this much each month. 11 Years of Tracking Investments: Life and Game Changers.
- If you can’t DIY this, shortly Help from our list of SEBI registered commission only advisors.
- To reduce the number of funds (if you want to do that)
- Decide whether you want to be an active MF or a passive MF investor. Passive investing is a great way to start investing.
- If you already own a Nifty or Sensex passive fund, direct your investment towards them.
- If some of the funds are “in the red”, sell them (except the Nifty/Sensex funds, of course).
- No, don’t think about it. just sell.
- The rest can be gradually culled during rebalancing events.
- If you want to be an active MF investor, invest in aggressive hybrid or flexicap funds (if you have one). Be prepared for today’s star to become tomorrow’s average performer, and vice versa.
- The final number of funds you want to keep is up to you. There are 1/3/10/25 possibilities. Personal finances are personal, but there has to be a way to insanity. to convince yourself. no one else.
More importantly, you stick to your plan and don’t buy any more funds! shiny object syndrome in your investment portfolio.
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Dr. M. Pattabiraman(PhD) is the founder, editor-in-chief and principal author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over 9 years of experience in publishing news analysis, research and financial product development.connect with him via twitter Also link in Also Youtube. Pattabiraman has co-authored three printed books: (1) Goal-based investing can get you rich (CNBC TV18) For DIY investors. (2) game changer for young people breadwinner. (3) Chinchu got a supernatural power! for children.he also wrote 7 others free e-book Various money management topics. He is a patron and co-founder of “.commission only india,An organization dedicated to promoting impartial, fee-free investment advice.
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