I am currently investing in 12 mutual funds. 10 out of them are through SIP. Just to make it clear, SIP (Systematic Investment Plan) means buying units of mutual fund each month (or quarterly/yearly) with fixed amount invested. Other are one time invested. Current funds cover all types as Debt, Equity and Hybrid.

I am planning to increase my investment. I have following options:

  1. Start new SIP in NEW mutual fund.
  2. Start new SIP in EXISTING mutual fund OR change existing SIP for more amount.
  3. Analyse existing portfolio to find out bad performing funds. Stop them and switch that amount to other good performing fund. Combine this with first option.

Let us neglect option 3, Debt:Equity ratio and objective based investment for now for simplicity. Also, SIP or not is not an issue here. Question is mostly about mutual funds.

One drawback of option 1 is that, it will add more mutual funds in my portfolio. Count may go up to 14 to 15.

Mutual fund (even a single) helps achieve moderate level of diversification. I think investing in too many mutual funds creates too much diversification. Does this cause any problem? Is this good or bad? Will this bring down returns? Will it be difficult to manage?


3 Answers 3


Other answers cover this in more detail, but there is probably no great problem from a diversification point of view (just because you have 14 or 15 different fund, doesn't mean you'll have 14 or 15 completely different sets of underlying investments: many funds are likely to have many assets in common).

However, what you may want to look at is how the fees for all these SIPs add up. I don't know about SIP fees specifically (beyond what is covered in something like this Economic Times page), but in other areas of investing it is not uncommon for certain fees to have a minimum charge (e.g. 2% of the size of the transaction with a minimum of Rs 500). If you are paying relatively small amounts into lots of SIPs, it is possible that you are paying multiple "minimum fees". If you paid more-per-SIP into fewer SIPs you might find the overall charges would be less.

One final note: if you are considering switching SIPs or consolidating the number of SIPs you contribute to (either to better fit your investment goals, or to amalgamate fees), be aware of any "exit loads" (see page quoted above) that might be payable if you move money out of a SIP before the end of the "holding period".


I don't think over-diversification is an issue. The goal of diversification is to reduce the chance of under-performers decimating your entire portfolio. On the other hand, since you're in 14 mutual funds, I think there's a slight chance you could be reducing the diversification in the underlying assets since each mutual fund is composed of different levels of diversified assets.

For example, you have 3 mutual funds. One has 20% in each of Asset A, B, C, D, and E. Another has 20% in Asset A, B, X, Y, and Z. The last one has 20% in A, J, K, L and Z. Each one is pretty diversified, but combined, you get 20% in Asset A, 13.3% in Assets B and Z, and 6.7% in each of Assets C, D, E, J, K, L, M, X, and Y.

Your goal might have been to have equal % in 15 different assets, but now your diversification goal has been messed up by being too heavily invested in assets A, B and Z.

If you have the time, you might want to look into the allocations of each of your funds and see if combined, it matches your investment allocation goals. At the very least, you should probably look into the asset class mix of each mutual fund and consolidate similar/underperformers into the lower fee/higher yielding funds.


Multiple mutual funds don't guarantee diversification. You could have a dozen funds but if 1/2 of them are invested in the same index or industry the result won't be as diversified as you expect.

Before deciding if you should invest in more funds you should evaluate your current funds. Look for common industries, common indexes, and common companies.

If the decision is to not expand the number of funds, then you could either increase your automatic investments in your current funds, or purchase addition shares as a one time purchase.

while looking at your diversification mix you can also evaluate your current funds to see if the funds you have are performing as need. You could then sell poorly performing funds and either shift the money to existing investments, or replace them with a different fund.


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