Should I invest in more than one scheme for one category of mutual funds? (2024)

FAQs

Should I invest in more than one scheme for one category of mutual funds? ›

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.

Investors should consider diversifying their portfolio across different asset classes and also within the same asset class. Additionally, it's important to consistently review and adjust their investments through rebalancing.

Financial planners say it is difficult to put a cap on the number of schemes in an investor's portfolio, as investors increasingly use mutual funds to meet both long-term and short-term goals. However, they feel investors should restrict themselves to 10 schemes, as a higher number is difficult to monitor and manage.

Investing in many large cap mutual funds is not necessary. One well-chosen large cap mutual fund should be enough. Mid cap equity mutual funds invest in mid cap companies only. Mid cap companies grow at much higher rates when compared to large cap companies.

It's important to make sure that your portfolio is well-diversified, but holding too many funds means there's a risk some may overlap. The value of investments can fall as well as rise and you could get back less than you invest. If you're not sure about investing, seek independent advice.

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.

"If you're trying to get a stable return over time, holding a diversified portfolio of securities with the proper mix of equities and bonds would be one of the best options. You could certainly achieve that with one ETF. You don't need to hold more than that to get a diversified portfolio," DeSanctis says.

What is the 15x15x15 rule in mutual funds? 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.

In the context of investing, it may also refer to the practice of not allocating more than 5% of a portfolio to any single security—in other words, of not letting any one mutual fund, company stock, or even industrial sector to accumulate to comprise more than 5% of the investor's overall holdings.

An ideal mutual fund portfolio is one that suits your goals and risk-taking capacity. It must also have a maximum of 6-7 funds to ensure adequate diversification.

Is it safe to keep more than $500,000 in a brokerage account? ›

They must also have a certain amount of liquidity on hand, thus allowing them to cover funds in these cases. What this means is that even if you have more than $500,000 in one brokerage account, chances are high that you won't lose any of your money even if the broker is forced into liquidation.

Investing in multiple mutual funds can be a smart move for investors who want to diversify their portfolios and gain access to professional asset management. However, it's important to be aware of the possible drawbacks, such as the potential for over-diversification and higher transaction costs.

Spreading your assets across different brokerage accounts can help protect you against potential fraud or unauthorized access, Roller says. If one broker has a breach, then you can still trade with another investment firm. The safety of your funds is also a concern.

By hiring a single investment advisor, you receive more streamlined advice as only one person manages all your money matters removing any chance of conflicting advice or any disagreement. This also allows the chosen individual to clear up your doubts and offer guidance to you on how to best attain your financial goals.

A diversified portfolio should have a broad mix of investments. For years, many financial advisors recommended building a 60/40 portfolio, allocating 60% of capital to stocks and 40% to fixed-income investments such as bonds.

First, set aside enough money in cash and income investments to handle emergencies and near-term goals. Next, use the following rule of thumb: Subtract your age from 100 and put the resulting percentage in stocks; the rest in bonds. In other words, if you're 20 years old, put 80% of your assets in stocks; 20% in bonds.

Some index funds provide exposure to thousands of securities in a single fund, which helps lower your overall risk through broad diversification. By investing in several index funds tracking different indexes you can built a portfolio that matches your desired asset allocation.

By investing in more than one asset category, you'll reduce the risk that you'll lose money and your portfolio's overall investment returns will have a smoother ride.

Investors seeking long-term capital appreciation, while avoiding concentration of their investment holdings in a single category and minimizing exposure to unwarranted risks and ongoing volatility, may find multi-asset allocation funds worth considering.

When investors have multiple brokerages it can help diversify and manage risk. While some investors appreciate the simplicity of keeping all their investment funds under one account, there are many reasons to branch out to different brokerages.