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:
- Start new SIP in NEW mutual fund.
- Start new SIP in EXISTING mutual fund OR change existing SIP for more amount.
- 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?