Hello Readers, If you are been into investing or planning to invest your money into Mutual Funds then this is the most expected question. People will be having this confusion whenever they start investing. Even myself I had this confusion that How many mutual funds to have in my Portfolio.

What are Mutual Funds?

In simple words, the money is collected from individuals or retailers and then invested with a common objective to various other places like stocks, bonds etc.

There will be a Fund Manager in the mutual fund companies where they will decide where your money will be invested and your funds will be maintained by them.

Fund Managers are qualified professionals and have in-depth knowledge about the market and finance.

The number of mutual funds will depend on the following factors

What is your financial goals in upcoming years?

We are living for a reason. First, you have to decide why you want to save money or invest in something.

Let me tell you about mine. I want to purchase IPAD and a good laptop for trading. In some years from now, I want to have a car or property. Last wish is to become financially independent. This is how I defined my goals and according to the time duration, I have taken multiple mutual funds.


What is an investment time horizon?

If you are considering the time horizon then there are 3 classifications that can be done.

  • Short term goals: Less than 2 Years
  • Medium-term goals: 2 years to 5 years
  • Long term goals: More than 5 years

If you are going with short term mutual funds then you can go with Debt mutual funds where it can be used to liquid the funds. If you want to go with long term goals then you must take some risky mutual funds which are connected with equities especially small-cap, mid-cap or large-cap. You can expect a very good return on a longer period and a bit higher risk.

Also Read: 10 things to check before Trading

What is your Risk Apatite?

Are you a risk-taker investor?

If you are willing to take some risk for a longer period of time or if you are in your 20’s or 30’s then you can go with Equity Mutual funds.

Again in equity mutual funds, you can go with a small-cap or mid-cap for higher risk and large-cap mutual funds for lower risk.

How many Mutual funds should I own?

Average 5 Mutual funds investing.

Why only 5 when I can purchase more than 10?

I am recommending 5 mutual funds for portfolio because they will give you good Diversification. It doesn’t mean you will focus on the same niche or sector mutual funds.

Let me explain you with an example,

I am owning 5 mutual funds where 1st mutual fund is for the short term where I want to purchase Ipad and laptop so I go with Debt mutual funds or liquid funds.

Two mutual funds, I want to take a certain level of risk and for a longer period of time. Here I will go with SIP where I invest 100 Rs to 500 Rs every month. I will go with Small Cap or Mid Cap where the return expected is certainly high. Here I will go with a lock-in period of at least 3 years or 5 years so I get more returns.

I am having a decent amount of income so I will take one ELSS mutual fund. Here you can check on various ELSS mutual funds and select based on sector analysis. I go with the IT sector because it is having promising growth in upcoming years.

My last mutual fund is my investment mutual fund that is Index Fund. I started mutual fund investing with an Index fund. Because there is no exit load cost and minimum expense ratio.

Things you must know before purchasing any mutual funds

I am using COIN’s product from Zerodha for mutual funds investment and this is How it looks like?

What is Asset Management Company?

The AMC is the company where it will start with different schemes under which your money will be allocated. Basically, they are the ones who own your money and manage it accordingly. Each AMC has various schemes depending on the time horizon and risk and other aspects. Here all the schemes will be authorized by SEBI.

What is Expense Ratio?

This will be the most important aspect while choosing the mutual fund investment. As we saw earlier, the AMC will be managing our money and they have certain expenses like Marketing on mutual funds, Staff salary, Fund manager’s salary and other expenses.

All these expenses will be charged to the investor that is known as the Expense Ratio. The lesser the Expense Ratio that will be one of the good criteria to choose mutual funds.

Example: You have a mutual fund with a 1% expense ratio and the mutual fund will provide a 13% profit in future. In this case, your total profit will be 12% (1% will be deducted from 13%). Here logically you have lost 1% of your investment return profit.

Suppose if a mutual fund started to perform badly in a long run then you have to pay the expected ratio amount if you are withdrawing the fund.

What is Net Asset Value?

NAV stands for Net Asset Value. This is the price at which you are going to purchase the mutual funds. NAV is calculated as below

Total Assets of the scheme – Total Liabilities of the scheme / Total number of units of the scheme

The NAV will be changing every day and updated by the AMC. The NAC price just looks at the price of a stock which will change every day.

How many mutual funds can I buy?

Suppose you are having 10,000 Rs to invest and you have selected a mutual fund with 50 NAV then you can purchase a total of 200 units. If the price of the NAC increases then your investment value will also be increasing.

What is the difference between Growth and IDCW schemes?

Whenever you are choosing a mutual fund you have two schemes known as Growth and IDCW schemes.

The growth plan never pays you anything in between and all the profits will be added and returned on the day you exit or on plan expires.

IDCW schemes you will receive the dividend on a periodic basis and the AMC will share the profits with you. If you want to withdraw this dividend income then you can withdraw it to the bank account or you can reinvest it again into the mutual funds.


Want to invest in a mutual fund then you can go with Coins by Zerodha. I am using Zerodha for the past 2 years and I am very comfortable using this. Zerodha offers many other platforms and learning as well. So it’s your time to invest.

Don’t delay the investment, the early you invest the more profits you make.

I hope this was helpful. Have any questions let me know in the comment section.

Thank you. Happy Investment.

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