Business & Finance
Owning 13 Mutual Funds for a ₹4.67 Crore Retirement Goal? Experts Say It Could Be Slowing Your Wealth Growth
Financial experts suggest that simplifying a crowded mutual fund portfolio and increasing SIP contributions over time may help investors build a significantly larger retirement corpus with less complexity.
Many investors believe that holding a large number of mutual funds automatically creates a stronger investment portfolio. However, wealth experts argue that excessive diversification can actually reduce efficiency and make long-term wealth creation more challenging.
A recent portfolio review of a 40-year-old high-risk investor targeting a retirement corpus of ₹4.67 crore over the next 20 years has highlighted this very issue. The investor currently invests ₹45,000 every month through SIPs across 13 different mutual fund schemes, covering categories such as index funds, flexi-cap funds, small-cap funds, hybrid funds, gold and silver funds, and sectoral funds.
While the portfolio has delivered satisfactory returns, financial planners believe its structure could be improved for better long-term performance.
Why 13 Mutual Funds May Be Too Many
According to market experts, owning too many schemes often creates overlapping investments instead of genuine diversification. This phenomenon, commonly known as “closet indexing,” results in a portfolio that closely mirrors the broader market rather than outperforming it.
When investments are spread across numerous funds with similar holdings, investors continue paying multiple expense ratios without gaining any meaningful performance advantage. It also becomes increasingly difficult to track each fund’s purpose and contribution to the overall financial goal.
A Simple Change Could Increase the Retirement Corpus
The investor expects to accumulate nearly ₹4.67 crore after 20 years based on an estimated 13% annual return while keeping SIP contributions unchanged.
However, experts believe introducing a modest 5% annual step-up in SIP investments could dramatically improve the final outcome. Under similar market conditions, the retirement corpus could potentially grow to approximately ₹6.5 crore to ₹7 crore, creating a much stronger financial cushion for retirement.
The recommendation highlights the importance of increasing investments alongside rising income instead of maintaining the same contribution year after year.
Simplifying the Portfolio Can Improve Efficiency
Rather than maintaining 13 separate schemes, experts recommend consolidating the portfolio into six or seven carefully selected high-conviction funds.
A focused portfolio offers several advantages:
Easier annual rebalancing- Reduced administrative burden
- Lower chances of overlapping investments
- Better tax efficiency
- Clearer allocation towards long-term wealth creation
Managing fewer funds also reduces unnecessary portfolio adjustments that may trigger avoidable capital gains taxes and interrupt the power of compounding.
High Gold and Silver Allocation Raises Concerns
One of the biggest observations in the portfolio was its heavy allocation towards gold and silver investments.
Currently, nearly ₹16,000 out of the ₹45,000 monthly SIP is invested in precious metals, representing more than one-third of the total investment.
While gold and silver act as useful hedging assets during uncertain market conditions, experts believe they should not dominate a portfolio designed for aggressive long-term wealth creation.
For an investor with a 20-year investment horizon and high risk tolerance, the suggested allocation to precious metals is closer to 12%, allowing them to serve as portfolio insurance without reducing overall growth potential.
Focus on Equity for Long-Term Growth
Experts also recommend reducing exposure to defensive investment categories such as multi-asset funds and aggressive hybrid funds.
These products are designed primarily to reduce volatility, making them more suitable for conservative investors. For someone investing over two decades with a higher appetite for risk, greater exposure to equity-oriented strategies may generate superior returns.
The proposed portfolio includes allocations towards flexi-cap funds, multi-cap funds, small-cap funds, consumption-focused funds, and momentum-based index strategies, while maintaining limited exposure to gold and silver.
Momentum Investing Could Add an Extra Growth Boost
Another recommendation is increasing exposure to momentum investing, a strategy that invests in stocks demonstrating strong price trends.
Historically, momentum-based strategies have delivered impressive returns during favourable market cycles, making them attractive for investors seeking long-term capital appreciation.
A balanced allocation between diversified equity funds and momentum strategies could provide additional growth opportunities while maintaining diversification.
Purposeful Investing Beats Complicated Investing
Financial experts believe that a successful investment portfolio should not simply contain many schemes—it should ensure that every investment has a clear purpose.
Reducing redundant funds, streamlining allocations, and maintaining disciplined annual reviews can improve portfolio management while keeping the focus on long-term wealth creation.
For investors planning retirement over the next two decades, simplicity, consistency, and regular SIP increases may prove more valuable than owning a large collection of mutual funds.
