How many funds should you hold in your portfolio? | Barclays Smart Investor (2024)

Conventional investing wisdom is that that putting their money into a range of different funds can help investors spread their risk.

That’s because if you invest into several different types of asset, as well as different geographical areas, if one of these assets or regions underperforms, hopefully some of your other investments will perform better, helping compensate for any losses.

Remember, however, that no matter how much you diversify your investments, they could still fall in value and you could get back less than you invest.

Knowing exactly how many funds you should hold in your portfolio isn’t always easy. Here, we explain why there’s no ‘magic number’ of funds to hold, and how there are funds available that can provide a single solution for investors seeking diversification.

Understand what you are investing in

When assessing whether you have the ‘right’ number of funds in your portfolio, the key point to consider is whether the number you hold can help you achieve your desired results, based on your approach to risk, and the time period you’re investing over.

For example, if you are comfortable accepting a high level of risk in return for potentially higher growth, you may decide to allocate more money into funds investing in shares. If you prefer to focus on lower-risk investments, you may want to include more funds that invest in bonds and gilts, which are bonds issued by the UK government.

Remember that investments should be held for at least five years, but preferably longer. They can fall as well as rise in value, so there’s the risk you could get back less than you put in.

Some funds focus on a specific geographical area, type of investment or sector. Others are more general and invest across several regions and sectors. Each fund typically holds dozens of underlying investments. If, for example, you invest in 20 different funds, you could be holding as many as 1,000 different stocks, and there’s a risk that you could be duplicating some of your investments.

You can find out more about each fund’s objectives, and risk and reward profile from the fund’s key investor information document (KIID), which you must read before you invest. If you hold several funds with the same investment objective and similar holdings, your portfolio may be overly concentrated or ‘overweight’ in one particular area, and you may want to consider rebalancing it. Remember, diversification comes from spreading your money across many different underlying investments, and not just by holding multiple funds.

Understanding when you have too many funds

While it’s important to make sure your portfolio is properly diversified, having too many funds can make it difficult to keep track of your investments.

You should therefore only keep as many funds in your portfolio as you’re comfortable monitoring. For example, if you hold 10 or 20 different funds, you’ll need to keep a close eye on the changing value of all these investments to make sure your asset allocation still matches your investment goals. If your time is limited, you may find it easier to keep an eye on the performance of a smaller number of funds.

It’s also important to remember that when parts of your portfolio perform strongly, they’ll become a larger part of your asset allocation, which means your asset mix can change.

If this happens, you may need to rebalance your portfolio and make changes so that the funds you hold have a chance of meeting your objectives.

Remember that no matter how you tweak your holdings, investments still carry risk. They can fall in value as well as rise and you may get back less than you invest.

How multi-asset funds may help

A multi-asset fund can provide a single solution for investors looking for diversification but who perhaps aren’t comfortable monitoring several different funds themselves, or who might not have the time.

As the name suggests, a multi-asset fund invests in a range of different assets, with the fund manager responsible for getting the balance of investments. There are different types of multi-asset funds, which have different investment objectives. The right variety of asset mix for you will depend on your attitude to risk. For example, if you have a strong appetite for risk, you may decide to invest in multi-asset fund with a higher proportion invested in shares than other assets, whereas if you are more cautious, you may prefer a multi-asset fund with a lower proportion in shares.

Taking on more risk can mean potentially higher returns but there’s also a greater chance of losing money. On the other hand, less risky investments may provide you with more secure returns (albeit that they too can still fall in value), but these are likely to be lower.

Multi-asset funds may be multi manager funds, which build a portfolio of different funds run by other managers. This gives the benefit of the manager’s investment decisions, but charges will usually be higher.

Again, you can find out the key features of these funds from their KIIDs.

Find out more about multi-asset funds

If you’re unsure where to invest, seek professional financial advice.

How many funds should you hold in your portfolio? | Barclays Smart Investor (2024)


How many funds should you hold in your portfolio? | Barclays Smart Investor? ›

While there is no precise answer for the number of funds one should hold in a portfolio, 8 funds (+/-2) across asset classes may be considered optimal depending on the financial objectives and goals of the investor. Further, higher allocation of portfolio to the right fund is of crucial importance.

How many funds should you hold in a portfolio? ›

You should therefore only keep as many funds in your portfolio as you're comfortable monitoring. For example, if you hold 10 or 20 different funds, you'll need to keep a close eye on the changing value of all these investments to make sure your asset allocation still matches your investment goals.

How much money should I have in my portfolio? ›

Cash and cash equivalents can provide liquidity, portfolio stability and emergency funds. Cash equivalent securities include savings, checking and money market accounts, and short-term investments. A general rule of thumb is that cash and cash equivalents should comprise between 2% and 10% of your portfolio.

How many funds make an ideal portfolio? ›

How many funds are enough? One thing you should always remember is that a lot of funds in your portfolio doesn't mean you have a diversified portfolio. A portfolio with 15 funds that have overlapping is not diversified. You should have no more than 4 funds in your portfolio.

What is the Warren Buffett 70/30 rule? ›

A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds.

How much of one stock should you have in your portfolio? ›

There is no set definition for what makes a concentrated position. When an investment in a single stock represents more than 5% of a portfolio, T. Rowe Price advisors consider it to be worth addressing. Once a holding exceeds 10%, however, it represents a greater risk that requires more immediate planning.

Is 30 stocks too many in a portfolio? ›

Typically people are advised to diversify their portfolio of stocks by investing in 20–30 companies. Doing this limits the downside risk should certain companies perform badly. Some people invest in 50 stocks while others invest in 5.

How much money do I need to invest to make $1000 a month? ›

A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.

What is the 50 30 20 rule? ›

Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

What is the 80 20 rule investment portfolio? ›

In investing, the 80-20 rule generally holds that 20% of the holdings in a portfolio are responsible for 80% of the portfolio's growth. On the flip side, 20% of a portfolio's holdings could be responsible for 80% of its losses.

Is the 3 fund portfolio good enough? ›

The three-fund portfolio is lazy investing at its best. It's simple, it's proven to have a better long-term track record of gains than picking single stocks and trying to time the market, and it lets you generally "set it and forget it" when it comes to saving for retirement.

What is a typical 3 fund portfolio? ›

A three-fund portfolio is a portfolio which uses only basic asset classes — usually a domestic stock "total market" index fund, an international stock "total market" index fund and a bond "total market" index fund.

Is a 3 fund portfolio good? ›

The three-fund portfolio is a sound investing approach, and you can't go wrong with it. If you set up asset allocation appropriate for your age, a three-fund portfolio will most likely perform well. I say "most likely" because nothing is guaranteed with investing, but this strategy is one of the safer options.

What is the 5% portfolio rule? ›

The rule can be adjusted based on your personal risk tolerance. While the rule states that no more than 5% of your portfolio should be invested in a single stock, you can adjust this based on your own risk tolerance.

Is 50 stocks too many in a portfolio? ›

Can you over-diversify a portfolio? Yes. Holding 50 stocks rather than 25 may lower your downside risk somewhat, but it can also reduce your profit potential. And at that point, it may be better to consider investing through an index fund, or even a combination of several sector-based funds.

Is 35 stocks too many for a portfolio? ›

Private investors with limited time may not want to have this many, but 25-35 stocks is a popular level for many successful investors (for example, Terry Smith) who run what are generally regarded as relatively high concentration portfolios. This bent towards a 30-odd stock portfolio has many proponents.

How many stocks should I own with $100k? ›

One rule of thumb is to own between 20 to 30 stocks, but this number can change depending on how diverse you want your portfolio to be, and how much time you have to manage your investments. It may be easier to manage fewer stocks, but having more stocks can diversify and potentially protect your portfolio from risk.


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