How many mutual funds should you have in your portfolio? | Mutual fund basics for beginners

Friends, welcome to my Investment Academy. In this video we will try to answer the question of how

many

fund

s you

should

have

in

your

mutual

fund

portfolio

now before answering the question of how

many

funds

you

should

have

in

your

portfolio

. One needs to ask themselves why you would want multiple funds in your portfolio. The obvious answer is diversification. Now let's look at the idea of ​​diversification not only in terms of

mutual

funds but in general diversification reduces the overall investment risk so you would reduce this risk by investing in all asset classes, these asset classes could be dead stocks, real estate, others such as commodities, etc.

Now, why would you diversify your investment across all asset classes? If one asset class does not do well, the other will do well and therefore your overall portfolio performance. I wouldn't jump in if you want to diversify further, I would invest in various types of debt instruments in the case of stocks; You would invest not just in one stock but in multiple stocks that come from various sectors, various market caps, etc. Back to Mutual Funds Mutual funds are already a collection of securities, so if we talk about dead securities, it is a collection of debt type securities, if we talk about stocks, it is a collection of multiple stocks, if we talk about balanced stocks or any other type of hybrid. funds is a collection of debt and equity type securities so mutual funds are already giving you diversification and that is the basic idea of ​​investing in mutual funds that give you diversification with low investment amounts now through our various videos that we have tried.

To make it clear that whenever you make your investments, your investments should be linked to your financial goals and depending on the time horizon you have for those goals, you should choose your investment vehicle, so you should invest up to three years of a horizon of time. debt type instruments for three to five years of investment, you should opt for balanced or aggressive hybrid funds, for Phi seven years of investment, you should opt for large cap funds, for seven to ten years of investment, you should choose cap funds multiple and for More than 10 years you should go for small and mid cap funds now, if you look closely at the investment vehicles here, this is the increasing level of investment risk and this is the precise reason why as long as your horizon of investment is less than three years, you should never invest in stocks as long as your investment horizon increases slightly, you can opt for a mix of equity and debt and as long as your investment horizon is five more, you can opt for pure equity investments, since large cap funds are less risky when we say here that they are risky.

It means that the B's would be risky if you don't match your investment vehicle with the right type of investment horizon. When you combine these two, your risk is reduced, so always match your investment horizon with the right type of investment vehicle, so let's say your investment horizon. It's five to seven years and you've opted for large-cap stocks. Now its large cap funds are those that invest a minimum of eighty percent of their assets in stocks and stock related instruments of large cap stocks. So which large cap stocks are the top one hundred? Companies in terms of market capitalization are called large cap stocks, so when you invest in more than one large cap fund you actually have a portfolio overlap, so if you go for a third fund you will again have the same shares invested. so three funds here does not mean three times better diversification, in fact one fund is good enough for the kind of diversification one needs now, one could argue that diversification is required in terms of fund manager as it concentrates all your portfolio into a fund manager, so in those In terms of funds by category, there should be a good amount of diversification.

Now here we are saying that two funds per category does not mean that you have to invest in all these categories if you do not have a goal that is in the range of 5 to 7 years, it could exclude large cap funds, so depending on the type of fund category I have to invest in, I could go for a maximum of 2 funds, so I could say here that I have two walls that are in the seven to ten year investment range. therefore multi cap funds for both your goals should have a good amount of diversification as many funds also make it difficult to track the overall returns of your portfolio so friends who were in this video I hope that after see this don't overdo it. diversify your diversification thanks for watching the video watch the space for more similar topics if you have any questions please let us know in the comments section below our videos and if you like our videos please subscribe and share them before we are done we want to tell you. know two things, the first is that you can create your financial plan for free on a new portal in which a lot is being invested, so try it.

More details about this are mentioned in the description of this video and secondly, you can buy our first book with 100 questions and answers on NSIP mutual funds on Amazon with cut-off etc. and the link to buy the same is mentioned in the description of this video, see in another video till then, happy investing