How Many Mutual Funds Should I Own? Guide By Certified Mutual Fund Advisor

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In the quest for optimal financial planning, understanding the role of mutual funds is paramount. As a certified mutual fund advisor and professional financial planner, navigating the question of “How Many Mutual Funds Should I Own?” is essential. Mutual funds offer diversified investment options, including ELSS mutual funds, which hold significance for tax-saving purposes. In this article, we delve into the rationale behind the number of mutual funds one should consider, shedding light on practical strategies for building a well-rounded investment portfolio. Let’s explore the fundamentals of mutual fund ownership and its implications for long-term financial stability.

Understanding the Role of a Mutual Fund Advisor

A mutual fund advisor, or a professional financial planner, is a trained and certified expert who helps individuals make sound investment decisions based on their financial goals, risk tolerance, and investment horizon. These advisors have in-depth knowledge of mutual funds and other investment products and can provide personalised guidance tailored to your needs.

Diversification is a crucial principle of investing that involves spreading your investments across different asset classes, sectors, and geographical regions to reduce risk. By diversifying your portfolio, you can mitigate the impact of market volatility and enhance long-term returns.

Understanding Mutual Fund Allocation

When it comes to investing in mutual funds, diversification is critical. However, diversification doesn’t mean owning dozens of funds. Instead, it’s about balancing allocation across different asset classes and investment strategies. Here’s what a certified mutual fund advisor suggests:

  1. Focus on Asset Allocation: A professional financial planner emphasises the importance of asset allocation based on your investment goals, risk tolerance, and time horizon. Instead of spreading your investments too thin across numerous funds, allocate your assets strategically among a few well-chosen funds.
  2. Quality Over Quantity: It’s not about the quantity of mutual funds you own but the quality. A diversified portfolio can be achieved with as few as three to five mutual funds covering different asset classes such as equity, debt, and hybrid funds.
  3. Consider Fund Overlaps: Before adding a new mutual fund to your portfolio, assess whether it provides significant diversification benefits or if it overlaps with existing holdings. Avoid redundancy by selecting funds with distinct investment objectives and styles.
  4. Monitor and Rebalance Regularly: Regular portfolio monitoring is essential to ensure alignment with your financial goals and risk tolerance. A certified mutual fund advisor recommends periodic rebalancing to maintain the desired asset allocation and address any drift due to market fluctuations.

The Role of ELSS Mutual Funds

ELSS (Equity Linked Savings Schemes) mutual funds hold a special place in tax-saving investments. Here’s a brief overview of the meaning of ELSS mutual funds and their significance in portfolio construction:

  1. Tax Benefits: ELSS mutual funds offer tax benefits under Section 80C of the Income Tax Act, allowing investors to claim deductions on investments up to ₹1.5 lakh annually. This makes ELSS funds a popular choice among investors seeking tax-efficient avenues for wealth accumulation.
  2. Equity Exposure: Unlike traditional tax-saving instruments such as the Public Provident Fund (PPF) and National Savings Certificate (NSC), ELSS mutual funds primarily invest in equities. This gives investors the potential for higher returns over the long term, albeit with higher volatility.
  3. Lock-in Period: ELSS funds have a mandatory lock-in period of three years, encouraging investors to stay invested for the medium to long term. This lock-in period instils discipline and prevents premature withdrawals, thereby fostering wealth creation through systematic investment.


Your financial goals, risk appetite, and time horizon should determine the optimal number of mutual funds in your investment portfolio. Consulting a certified mutual fund advisor or professional financial planner can provide invaluable guidance in constructing a well-diversified portfolio tailored to your needs. Remember to prioritise quality over quantity, focus on asset allocation, and consider the relevance of ELSS mutual funds in achieving your long-term financial objectives. By following these principles, you can navigate the world of mutual fund investments with confidence and prudence.

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