Mutual Fund Sahi Hai. Par Kaunse aur Kitne?
Mutual Funds have proven their worth as an investment tool used to compound wealth. But are you using this tool in the way it is supposed to work? Is every SIP investment getting you a Paisa Vasool re
A friend of mine- a sharp IT guy, has been doing fairly well for himself. He has been steadily climbing the corporate ladder, and has been responsibly saving his money every month. One day, he explained how he has been very careful with his portfolio, and that he has worked to diversify it.
I asked him what he meant.
He said he has been investing in a large cap fund, a large and midcap fund, a flexi cap fund, a multicap fund, a midcap fund an ELSS fund, an international fund, a small cap fund and even two sectoral funds.
All of this for the ‘long term’
For him, ‘long term’ investments meant investing in ten funds. When asked why, he said he has balanced his ‘risk’ and felt confident that his funds will work the way they expected. To put that to the test, I pulled up all the 10 holdings of his large cap fund and flexi cap fund side by side. The results were shocking- eight out of the ten most prominent stocks were the same- Reliance, HDFC Bank, ICICI Bank, Infosys, TCS. He was basically paying two different AMCs two different expense ratios, for the same portfolio-twice.
This wasn’t diversification. This was a lack of awareness.
The Scale of This Problem
India’s Mutual Fund industry has grown sixfold over the past 10 years. In 2026, the industry’s AUM crossed Rs.73 lakh crore with 10 crore SIP accounts. Much of this has been attributed to the Mutual Fund Sahi Hai campaign, while the rest has come from aggressive marketing and in-person advisory from your neighbourhood Mutual Fund advisor.
Today, there are almost 50 AMCs registered with SEBI. Collectively, they manage about 1,500 schemes, while in the United States, with one of the largest Mutual Fund industries, has fewer active equity funds comparatively.
For investors, this has resulted in the Paradox of Choice, a phenomenon put forth by psychologist Barry Schwartz. With so many funds to choose from (even within one asset class), most don’t know which one suits them best, and end up making the wrong decisions.
What this ‘Overdiversification’ Actually Does To Your Returns
Let’s get back to my friend we discussed earlier.
Just two of his funds have invested in eight of the same ten companies. But what about the other funds in his portfolio? With his investments in 10 funds, 10 different fund managers have been handling his investments, with each of them doing it in their own way.
And each of these funds charge differently to manage the money, known as the ‘expense ratio’. Though these vary based on the type of the fund, most of these are in the range of 0.5% to 1.5%. For the sake of simplicity, let’s assume this expense ratio is 1%.
Now, if you are investing Rs.1,000 in 10 funds through SIP, that means you are effectively paying Rs.100 as fees to manage these funds. If this SIP was consolidated into just two funds, for example, you would be paying just Rs. 20 for the same.
But our friend here was aware of the expense ratio, but chose to ignore it, primarily because it was just 1% of the monthly investment.A fairly insignificant number to bother about. For your returns, this isn’t an insignificant charge, it is a significant overcharge that causes your portfolio to get overdiversified.
Three reasons behind the investment overdiversification
This has got to do about a system that makes it easy to add but hard to audit.
Reason 1: The SIP Trigger
A new financial year starts. Motivated to save more post increment, you choose to start one more SIP. Someone recommends a fund. You may agree, as the markets are doing well. This happens three, four, five times over as many years. The zeal to save makes you forget the long term implications of the SIP.
Reason 2: The Rating Trap
Five-star ratings feel like safety, just as we use them to gauge our electronics. Investors tend to pick the top-rated fund in each category. Large cap — 5 star. Mid cap — 5 star. Flexi cap — 5 star. What they don’t know is that star ratings are based on past performance, specifically the last 3 years. That remains the worst time to invest or enter a fund, as the market dynamics will keep changing, and the managers experience to maintain consistent returns will be tested.
Reason 3: Nobody Said Stop
Your distributor earns trail commission as long as you stay invested. Your app sends you a notification every time you can add a new SIP. Nobody in the system has a structural incentive to tell you that you already have too many funds, that three of them are redundant, that you are paying for complexity that isn’t helping you. So the portfolio keeps growing. And the investor keeps feeling responsible.
What A Good Portfolio Actually Looks Like
For investors, the SIP mode remains the best medium to save money for the long term. However, the difference is how you choose the funds and why you do so. Experienced financial experts recommend an optimal portfolio of about 4-5 funds to ensure optimal diversification, based on your financial goals. This could be retirement, education, personal expenses or even saving for a holiday.
Besides that, a 10% annual step up SIP will also match your rising income and inflation, even while keeping the 12% CAGR return assumption constant to build wealth. Most experienced financial planners will ask you such questions even before they ask you how much you earn or how much you aim to save.
So Where Does That Leave You?
Before you read further, answer this honestly: Can you name right now what each of your SIPs is specifically meant to fund?
Not “retirement” or “wealth creation.” Something specific. A corpus amount. A year. A purpose.
If you can’t, you’re not alone. Most investors can’t. And that’s not a personal failure, it’s a structural one. The industry sold you the instrument without helping you define the destination. This Is Exactly The Problem We Built Around. At Greenportfolio, The Roadmap Series is our attempt to answer the question this newsletter is asking kaunse aur kitne.
This is not a list of funds, nor is it 14 schemes across 8 categories.
These are goal-based mutual fund baskets built backwards from a milestone. It could be ₹25 lakhs, ₹50 lakhs or even ₹1 crore. Each basket tells you which funds to hold, in what proportion, and why. No redundancy. No overlap. Every rupee has a destination.
And because we operate on a flat subscription model, our recommendation doesn’t change based on your portfolio size. Whether you invest ₹1 lakh or ₹1 crore, the fee is the same. Which means we have no reason to tell you to add more funds than you need.
That is a harder thing to find in this industry than it should be.
If this makes sense to you, find out more more about it here: Build my Roadmap
Disclaimer: This newsletter is for informational and educational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell any securities. Views expressed are based on publicly available information as of the date of publication and may change without notice. Please consult a qualified financial adviser before making any investment decision.