Why should I invest in only 1 or 2 Mutual Funds? Aadhav, 11 Dec 2013

Dear Sir, To create retirement corpus like long term objectves you have always been suggesting to go with only 1 or max 2 Mutua Funds, is there any specific reason for that? Is it not good option to invest in multiple Diversified Equity based funds so that incase if one fund gives you loss you can hope other fund wil give good return? Also for my investment(20yrs away) I am planning to invest in HDFC TOP 200, HDFC Equity, DSP BlackRock Top 100 Equity for minimum 10yrs and 5000RS on each fund each month - what is your take on this? Do you think I should make any changes to this?

Fintotal Answer

Hi Aadhav, Mutual fund itself is a diversified product. Each fund invests in 20-25 stocks and the it gives you the benefit of averaging in case of when 1 stock overperforms or underperforms. All the top equity diversified funds invest in more or less similar stocks. We keep on saying to have just one or two funds in a category because adding more funds is really not going to help you. We are not against it but we believe that financial life should be kept as simple as possible. So it is always good have minimum complications, tracking, etc. You can go ahead with the above mentioned funds, there is no harm. 

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