Less is more

Your crowded portfolio is your biggest enemy

- Anupama Garg and Ashish Menon

Every now and then, a New Fund Offer (NFO) comes out with a great story. Markets go abuzz. The distributing agencies start selling the fund like hotcakes. And you, dear investor, end up buying another fund, leading to a cluttered portfolio.

Don’t worry, it’s not just you. It’s actually commonplace. Recently, we studied 47,342 investors’ portfolios available in our database. We did this to learn the behavioural patterns of investors, and this is what we found: Of the 47,342 portfolios we aggregated, 17,787 had more than 10 funds. This means that more than one in three investors had a cluttered portfolio, according to us. In fact, one of them had 260 funds!

Sure, a person with an enormous corpus may want to distribute their money over a larger number of funds, but the fact that around 37 per cent of investors own 10-plus funds lays bare our investing psychology – about hoarding, collecting, and eventually cluttering.

Cluttered portfolio, clattered returns 

People love a good story. (Remember what we told you about NFOs? Just look at 2007. It witnessed the launch of 28 NFOs. If you had hopped on the NFO express and picked even 10 of those funds, your cluttered closet would have given you a meagre 9.8 per cent return).

Or people have preferences for themes and sectors. Usually, they have already shown their best performance by the time most of us actively invest in them. It’s always in hindsight – wisdom and also the performance of a fund.

At other times, people suffer from FOMO (Fear of missing out). Moreso now, when investing is so easy, as it’s just a click away!