Bridge over ocean
1 March 1997 Financial Analysts Journal Volume 53, Issue 2

How Many Mutual Funds Constitute a Diversified Mutual Fund Portfolio?

  1. Edward S. O'Neal

Can investors receive diversification benefits from holding more than a single mutual fund in their portfolios? Simulation analysis shows that the time-series diversification benefits are minimal but that the expected dispersion in terminal-period wealth can be substantially reduced by holding multiple funds. Portfolios with as few as four growth funds halve the dispersion in terminal-period wealth for 5- to 19-year holding periods. In addition, downside risk measures decline as funds are added to portfolios. These advantages to multiple-fund portfolios are especially meaningful for investors funding fixed-horizon investment goals such as retirement or college savings.

Read the Complete Article in Financial Analysts Journal Financial Analysts Journal CFA Institute Member Content

We’re using cookies, but you can turn them off in Privacy Settings.  Otherwise, you are agreeing to our use of cookies.  Accepting cookies does not mean that we are collecting personal data. Learn more in our Privacy Policy.