The consensus is that a well-balanced portfolio with approximately 20 to 30 stocks 澳洲幸运5官方开奖结果体彩网:diversifies away the maximum amount of 澳洲幸运5官方开奖结果体彩网:unsystematic risk. Because a single 澳洲幸运5官方开奖结果体彩网:mutual fund often contai🍒ns five times that number of stocks, does that mean that one fund𝓀 is enough?

Vote "Yes"

Proponents of the "Yes" theory suggest that equity investors buy a broad 澳洲幸运5官方开奖结果体彩网:index fund, such as the Vanguard Total Stock Market Index Fund, and let time do its work. Even investors seeking exposure to both stocks and bonds can get their desired 澳洲幸运5官方开奖结果体彩网:asset allocation through the purchase of a single 澳洲幸运5官方开奖结果体彩网:balanced fund.

Vote "No"

On the equity side, others would note that a single fund would fail to provide adequate exposure to international investments. The argument here is that a global fund provides a little bit of everything, but not enough of anything. From there, the argument goes that a 澳洲幸运5官方开奖结果体彩网:large-cap domestic fund and a 澳洲幸运5官方开奖结果体彩网:small-cap domestic fund cover the bases on the home front. An international fund, perhaps two at most, cover the international front. Two-fund proponents select one fund from the developed foreign markets, like Europe, and the second in 澳洲幸运5官方开奖结果体彩网:emerging markets such as the Pacific Rim or Latin America. If fixꦦed-income exposure is desired, a domestic bond fund is added to the mix, bringing the count to six funds.

What About the Style Box?

The traditional mutual-fund 澳洲幸运5官方开奖结果体彩网:style box consists of nine investment categories representing domestic equities. Those categories are based on 澳洲幸运5官方开奖结果体彩网:market capitalization (micro, small, mid, large, etc.) and investment style (value, mixed, growth). The 澳洲幸运5官方开奖结果体彩网:bond style box, in similar fashion, has three maturity categories (short-term, intermediate, and long-term) and three categories of credit quality (high, medium, and low). An investor does not need a fund in all the stock and bond categories. A few funds can be c🦋hosen that best fit an investor's asset-allocation and risk-return requirements.🥀

The Downside of Diversification

While mutual funds are popular and attractive investments because they provide exposure to 🍬a number of stocks in a single investment vehicle, too much of a good thing can be a bad idea.

The addition of too many funds simply creates an expensive index fund. This notion is based on the fact that having too many funds negates the impact that any single fund can have on performance, while the 澳洲幸运5官方开奖结果体彩网:expense ratios of multiple funds generally add up to a number that is ꦏgreater than average. The end result is that expense rꩲatios rise while performance is often mediocre.

No Magic Number

Although there are hundreds of mutual fund providers offering thousands of funds, there's no magical "right" number of mutual funds for your portfolio. Despite the lack of agreement among the professionals regarding how many funds are enough, nearly everyone agrees that there is no need for dozens of holdings. In fact, even many mutual fund companies are now promoting 澳洲幸运5官方开奖结果体彩网:life-cycle funds, which consist of a mutual fund that invests in multiple underlying funds The concept is simple: Pick one life-cycle fund, put all of your money into it and forget about it until your reach retirement age. These funds, also referred to as "age-based funds" or "澳洲幸运5官方开奖结果体彩网:target-date funds," have an intrinsic appeal that's hard to beat.

Building Your Own Mutual-Fund Portfolio

If you prefer to 澳洲幸运5官方开奖结果体彩网:build a portfolio rather than buy an all-in-one solution, there are simple steps you can take to limit the number of funds in your portfolio while still feeling comfortable with your holdings. It begins by considering your objectives. If income is your primary goal, that international fund may n꧒ot be necessary. If capital preservation is your objective, a small-cap fund may not be needed.

Once you've determined the mix of funds that you wish to consider, compare their underlying holdings. If two or more funds have significant overlap in holdings, some of those funds can be eliminated. There's simply no point in having multiple funds that hold the same underlying stocks.

Next, look at the expense ratios. When two funds have similar holdings, go with the less expensive choice and eliminate the other fund. Every penny saved on fees is one more penny working for you. If you are working with an existing portfolio rather than building one from scratch, eliminate funds that have balances that are too small to make an impact on overall portfolio performance. If you've got three large-cap funds, move the money to a single fund. The amount spent on management-related expenses is likely to decrease and your level of diversification will remain the same.