How Many Funds Do You Need? Probably Fewer Than You Think

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“With the number of mutual funds and exchange-traded funds exploding, investors might be tempted to purchase more funds. After all, diversifying a portfolio is a good thing, right?

“Yes, but only up to a point. After that point, more can be less. In fact, investors can put together a sturdy, diversified portfolio with fewer than five funds, and for plenty of people, just one will do, some financial advisers and analysts say. The minimalist strategy can provide reasonable returns with limited risk and low fees, they agree.

” ‘Simpler can be better,’ says Tom Fredrickson, a New York financial planner. ‘It takes human emotion and behavioral mistakes out of the equation. As people don’t have to actively do anything, it benefits them in the long run.'”