₹74 Lakh Crore AUM, 241 Million Folios: How Many Mutual Funds Are Too Many?

With India’s mutual fund assets crossing ₹74 lakh crore and folios reaching 241 million, investors must understand whether they are over-diversifying, risking portfolio duplication and reduced efficiency.

Record AUM and Folios: A Sign of Investor Optimism or Portfolio Clutter?

The Indian mutual fund industry has grown rapidly, reaching ₹74.41 lakh crore in AUM and over 241.3 million folios. This surge, driven by 190.7 million retail investors and HNIs, indicates growing reliance on mutual funds. However, many portfolios have become crowded, containing overlapping schemes that dilute returns without proportionately reducing risk. This situation often arises from a lack of focused fund selection and excessive diversification.

How Many Mutual Funds Should You Ideally Hold?

A well-structured mutual fund portfolio should typically consist of 5 to 7 equity schemes forming the core. These may include large cap, flexi-cap, ELSS, and value or contra funds, making up about 65 to 70%. The satellite portion, around 30 to 35%, could include aggressive hybrid, mid-cap, and optionally small-cap funds for longer-term growth. Adding 3 to 4 debt funds can address liquidity and short-term needs.

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Balancing Equity, Debt and Alternatives for a Streamlined Portfolio

Over-diversification often leads to owning similar types of funds across categories. This results in repetition of stock holdings, defeating the purpose of diversification. To balance the portfolio, inclusion of liquid or PSU debt funds suited to short-term needs can be considered. Additionally, multi-asset funds and gold funds provide a hedge during volatility and add diversification across asset classes.

Streamline Your Portfolio, Reduce Complexity

Rather than chasing past returns or external advice, investors should evaluate their portfolios for redundancy. A tight portfolio with 13 to 15 well-chosen schemes each serving a specific financial goal, is more effective than owning 20 or more overlapping schemes, which only increase monitoring complexity.

Conclusion

While India’s mutual fund adoption is surging, investors should ensure their portfolios remain efficient and aligned with personal goals. Quality, not quantity, leads to better performance over time.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund Investments are subject to market risks, read all the related documents carefully before investing.