Holding 15 mutual funds? Here’s how to cut overlap and reach Rs 2 crore goal

Many investors think adding more mutual funds will improve diversification, but too many funds can actually create duplication and reduce efficiency. Instead of helping, it often leads to overlap and makes the portfolio harder to manage. A good portfolio doesn’t need many schemes, just a few well-chosen funds that match your goals, risk level, and time horizon are enough.

A similar query came from Swapneel, a viewer of The Money Show, aiming to build a corpus of Rs 2 crore in 10 years through a monthly SIP of around Rs 40,000. He is investing via SIP in Parag Parikh Flexicap Rs 5000, ICICI Prudential Commodities Fund 2500, Motilal Oswal Nifty India Defence Index Fund Rs 2500, DSP India Tiger Fund Rs 2500.

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The same amount is invested in UTI Nifty 50 Index Fund, HDFC Large and Midcap, SBI Gold, Quant ELSS, HDFC Smallcap, HDFC Midcap, SBI Midcap, Nippon India Multicap, Quant Smallcap, ICICI Pru Aggressive Hybrid Active Fund of Funds and Mirae Asset Largecap Fund. He wants to know if this particular fund mix is good for him or not.

Too many funds leading to overlap

According to expert Samir Shah, Founder, Investa Financial, holding a large number of schemes often results in significant overlap, especially within similar categories. In this case, multiple large cap, mid cap, and large & midcap funds together may have as much as 45–50% overlap in underlying stocks.

Shah pointed out that investors should ideally limit their portfolio to four to five high-quality schemes for a specific goal. The first step, therefore, is to reduce the number of funds and eliminate duplication.

He further said that, “there are three midcap funds, two midcap funds, two largecap funds, one large and midcap fund. If we put together all five funds more or less 45% to 50% stock overlapping is there.”

The investor can have one largecap fund, one flexicap fund, and say from the portfolio in flexicap category he can keep Parag Parikh Flexicap Fund. As he already has an index fund in his portfolio that is UTI Nifty 50, he can keep continuing in this fund and merge the rest of the funds.

Next he can have one midcap fund, HDFC Midcap is doing good in his portfolio, so he can keep that and merge others with this. There are two smallcap funds, suggestion is that both are good funds so you can keep any of them. And lastly as he is doing SIP in gold so he can keep the fund.

At the same time, the expert advise caution when it comes to sectoral and thematic funds such as defence or infrastructure. Shah said that as you have a flexicap and other category of funds, see sectoral fund can be invested for a short-term move, say when you are expecting some spike in that particular sector that point in time you have to invest, rest as you are investing for 10 years’ time, your investment time horizon is 10 years, so suggestion is that instead of having infra or sectoral thematic fund in your portfolio suggestion is that you can divert that fund to flexicap fund.

Similarly, if the investor has opted for the new tax regime, continuing SIPs in ELSS funds may not be necessary, and those contributions can be shifted to core portfolio funds.

By following this approach, the number of schemes can be reduced from around 15 to 5–6, making the portfolio more efficient and easier to manage.

What defines a high-performing fund?

While advising him to exit a lot of existing funds or repetitive funds in the portfolio, Shah said that a high performance does not mean that the fund which is giving a good return or maybe on the return front they are topping the chart and high performance should not be judged solely by recent returns or rankings.

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Shah explained that long-term investing requires evaluating how a fund performs across market cycles, especially during downturns. Risk management strategies, consistency, and alignment with the investor’s risk appetite are more important than short-term outperformance.

For instance, aggressive funds like small cap schemes may outperform in bullish phases but can also be highly volatile during market corrections. Investors need to choose funds based on their comfort with such volatility.

So one has to consider two things. First is the risk appetite of the investor and second, the risk management of AMC particularly when the market is going down what strategy they are adopting.

Is the current SIP enough to reach Rs 2 crore?

With a monthly SIP of Rs 40,000 over 10 years and an assumed return of 12% CAGR, the expected corpus may reach around Rs 90–95 lakh—significantly below the Rs 2 crore target.

To bridge this gap, experts suggest three possible approaches which includes he can increase his SIP from 40,000 to 85,000 immediately, in that situation he will be able to meet the target. Second is if he is not able to increase SIP amount immediately, in that situation he has to increase the SIP from 40,000 to 60,000 and do increase SIP by 10% every year and the third is the target which he has set for himself is a bit aggressive.

In case if he is not able to do any of this, in that situation he has to extend his investment tenure from 10 years to 15 years.

A long list of mutual funds does not necessarily translate into better diversification or higher returns. Instead, a focused portfolio with 4–6 well-chosen funds across key categories can deliver more efficient outcomes.

For investors with ambitious goals like building Rs 2 crore in 10 years, the key lies in simplifying the portfolio, increasing investment contributions, and staying disciplined over the long term rather than chasing multiple schemes.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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