How do I reduce clutter in my mutual fund portfolio?

A look at “How do I reduce clutter in my mutual fund portfolio so that it can tracked and reviewed easily?”. Typically mutual fund investors with few to several years of experience are interested in this exercise.

The first step is to recognise clutter. I hold 8 funds. If I posted just that information at AIFW and ask, ‘is it too many?’, there would at least be a few answers which go, ‘yes’. Someone might even offer me advice on the ideal number of funds a folio should have.

However, the context is missing here. I have 4 funds tagged to my retirement goal, 3 to my son’s education and 1 to his marriage. You can read more about my goal-planning strategy in the financial audits I post in December.

While 8 may seem like a big number to you, it is a perfectly manageable number to me. I do not like the idea of holding a couple of funds for all long-term goals. For me, not all long-term financial goals the same.

I had earlier made this point in this post: How many fund should I hold?

What is cluttered -our portfolio or our minds? It is always the mind, it is not?! The culprit is the way in which we buy funds. When I realised this about 4 years ago, I told myself,

  • I will tag my existing funds to my financial goals
  • I will do my best to understand the position of each fund in a goal portfolio. That is, I must realise the objective of the fund and how it can find a place in the portfolio.
  • I will not buy a new fund, unless I exit an old fund.
  • For that I need to know how to review a mutual fund portfolio with personal benchmarks and not star ratings.
  • I will not buy funds because everyone it talking about it.
  • Even if I find two similar funds in a goal portfolio, I will not make knee-jerk reactions in removing one.

After this and after a bit of staring at NAV movement, I came up with minimalist portfolio ideas for young earners

I am gradually trying to make my folio as minimalist as possible for each long-term goal.

There is a flaming hurry to unclutter the mind and have a process in place of portfolio review. There is no flaming hurry to reduce the number of funds.

Like everything else in personal finance, that number is also deeply personal. A person can have two large cap or two mid and small-cap funds from different amcs if his portfolio size is ‘big’ and he wishes to spread the risk -something that Balaji Swaminathan pointed out to me.

If all this is in place and I find that I am holding way too many funds, what should I do?

Analyze weights What is their value wrt entire portfolio value? If a few funds have large weights and a few relatively small, then you can

  • choose to ignore the small-weight funds. Do not invest further in them and leave them be.
  • choose to redeem from these and shift to the large weight funds.

It is only when you have large no of equally weighted funds, there will be dilemma. It can still be solved by deciding on strategy: “my folio should hold X% of large-caps, Y% of mid and small-cap with Z% of international equity”.

Do not look at star ratings before or after switching. The funds you exit might get a higher peer rank after you exit! Regret does not accomplish much.

When should I switch? Should I wait for markets to improve, so that I can exit on a high?

You could, but for a long-term goal, it will not make much of a difference, if you exit the moment you realise that the fund is a weed in your folio.

How should I switch? Should I exit in one-shot or should I transfer little by little?

All units which are free from exit load and eligible for long-term capital gain (or loss) computation can be redeemed or switched out in one shot. The rest can wait until they become eligible.

Ashal used to describe this in the JI forum as, “a switch from one express train to another, and can be done in one shot”.

De-cluttering a portfolio is easy. Ensuring that it stays that way is hard!

Want to conduct a sales-free "basics of money management" session in your office?
I conduct free seminars to employees or societies. Only the very basics and getting-started steps are discussed (no scary math):For example: How to define financial goals, how to save tax with a clear goal in mind; How to use a credit card for maximum benefit; When to buy a house; How to start investing; where to invest; how to invest for and after retirement etc. depending on the audience. If you are interested, you can contact me: freefincal [at] Gmail [dot] com. I can do the talk via conferencing software, so there is no cost for your company. If you want me to travel, you need to cover my airfare (I live in Chennai)

Connect with us on social media

Do check out my books

You Can Be Rich Too with Goal-Based InvestingYou can be rich too with goal based investing

My first book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create customg solutions for your lifestye! Get it now . It is also available in Kindle format .

Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want

Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you want
My second book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a youngearner

The ultimate guide to travel by Pranav Surya

Travel-Training-Kit-Cover This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for ₹199 (instant download)

Create a "from start to finish" financial plan with this free robo advisory software template

Free Apps for your Android Phone

All calculators from our book, “You can be Rich Too" are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)

About Freefincal

Freefincal has open-source, comprehensive Excel spreadsheets, tools, analysis and unbiased, conflict of interest-free commentary on different aspects of personal finance and investing. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. We do not accept sponsored posts, links or guest posts request from content writers and agencies.

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.

6 thoughts on “How do I reduce clutter in my mutual fund portfolio?

  1. That Express train thing was meant for people asking to apply STP/partial transfers from duds to performers. 🙂

    Thanks for remembering it.



  2. I recently realized that having small # of funds or a larger portfolio to reduce risk is not the question – each fund must not overlap beyond 10-15%, else there is no reduced risk due to diversification.

Comments are closed.