Business

What Is The Ideal Number of Schemes for Your Mutual Fund Portfolio?

Share

To achieve their financial objectives, investors should diversify their mutual fund portfolios over a range of asset classes, including gold, fixed income, and equity. This would include expanding their portfolio to include multiple schemes.

How Come Investors Spread Their MF Portfolios?

Investors have distinct life goals and objectives that must be accomplished in different time frames. Different asset classes, such as equity, fixed income, and gold, or a combination of them, would be needed to achieve these aims. As a result, portfolio diversification across asset classes and schemes is necessary.

Why Make Multiple Scheme Investments?

Each scheme in an investor’s portfolio serves a particular purpose. For instance, you may invest in an equity savings fund to save for a vacation that is one to two years away or to pay for your children’s school one year from now. Alternatively, you could invest in an arbitrage fund or a liquid, ultra-short-term fund to fulfill your emergency needs.

A gold fund would be used as an inflation hedge, while a target maturity fund may be utilized if you plan to stash money away safely for, say, five years from now. In the equity space, alpha can be generated and goals that are ten years away can be met by investing in small-cap funds; alternatively, ELSS funds can be used to save taxes under Section 80 C of the Income Tax Act. Investing in large-cap companies could be done with a passive index fund.

Investors seeking international exposure to geographically diversified portfolios may purchase a US-based or Nasdaq fund, while investors confident in a certain broad subject and confident in timing the market will invest in a technology fund or a themed fund such as a business cycle fund. Due to all of this, investors’ mutual fund portfolios eventually contain more than one or three schemes.

What Is The Ideal Number of Plans?

An investor’s portfolio can have a lot of schemes since mutual funds are being used by more people to achieve both short- and long-term investing objectives. They do believe, nevertheless, that investors should limit themselves to no more than ten schemes, as managing and monitoring more is challenging.

Examining overlaps with a comparable scheme is one approach to reduce the number of schemes in portfolios. An investor should consider the degree of overlap in their portfolio before adding a flexi-cap fund, another large-cap fund, or an index fund, for instance, if they already have a large-cap scheme. A large overlap suggests that diversification is ineffective and won’t provide any additional returns to the portfolio.

Komal Patil
Published by
Komal Patil

Recent Posts

Steps to Establish Your Business Credit for Any New Small Business

Getting business credit is an essential step for any new small business. It allows you… Read More

6 hours ago

7 Essential Investment Success Tips Every Investor Should Know: How to Beat the Market

Investing is essential if you want to build wealth and achieve long-term goals such as… Read More

1 day ago

9 Things You Need to Do Right Away If You Want to Start Your Own Business in 2025

Many Americans fantasize about leaving the rat race of office jobs and starting their own… Read More

1 day ago

Apple’s M4 Max Sets New Speed Records as the Fastest CPU on the Market and M4 Ultra Yet to Come

Apple revealed new MacBook Pro models this week, with M4, M4 Pro, and M4 Max… Read More

2 days ago

12 Essential Marketing Tools Every Small Business Owner Should Try

Marketing is now more affordable and perhaps more successful than ever. That is, provided you… Read More

2 days ago

TikTok Announces an Update to Its Marketing Education Platform ‘TikTok Academy’

Are you looking to step up your TikTok marketing game? This will help. Today, TikTok… Read More

3 days ago