The 8 to 18 fund rule

This is the manageable number of funds in your portfolio. If the number of funds is greater than 18 then it can get difficult for an investor to keep track of what’s going on — professional portfolio managers tend to run at about 50 fund holdings but are on the case 24/7 and have a supporting team. Another problem in holding too many funds is that overlap can occur.

Transcript

The 8 to 18 fund rule is the manageable number of funds in your portfolio. If the number of funds is greater than 18 then it can get difficult for an investor to keep track of what’s going on. The professional portfolio managers tend to run about 50 fund holdings but are on the case 24/7 and have a supporting team.

Another problem in holding too many funds is that overlap can occur. Funds may well hold the same underlying investment so your portfolio can become concentrated in an underlying stock without you realising. Most platforms have online tools to prove your portfolio eg Hargreaves Lansdown Portfolio analysis or the standalone Morningstar x-ray tool.

All too often I see portfolios where the investor buys into this year’s hot ISAs or funds and pick another the following year. The portfolio can be taped into an unwieldy collection of mismatched funds.

Having too many funds can make you well diversified but at a high cost you may as well have a cheap mixed asset fund or truckers shares may have found their way into your portfolio from privatisations or being given to you by your employer.

They may have shot up in value and now dominate your portfolio but to come down like a stick consider selling some off and wine something else. Have a good look at your portfolio and give it a spring clean by switching out of the poor performance. The best investment spot for once-popular funds is handy but most platforms can rank your fund.

Alternatively if you don’t have the time to manage your portfolio be honest then it’s worth considering a risk managed multi asset fund or having a robo

Dreiser do it all for you and visit our platform fee calculator to see if you can shave some money off the charges.