I don’t want to set a specific limit to the number of funds you should havefive, six, seven or whatever. But once you’ve got a diversified core portfolio, any extra potential benefit you may reap by piling on more investments declines. Monitoring and managing your portfolio also becomes more difficult, and rebalancing can become a real hassle. As you get into narrower and more arcane investments, fees are likely to go up as well, which can undermine performance.
And let’s be honest. At some point, adding more funds becomes less about improving diversification and more about the inclination to join the latest fad or demonstrate that one’s portfolio is “state-of-the-art.” Some advisers may also create complex portfolios in part to justify their fees.
So how should you proceed?
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