Mistakes to avoid while creating a mutual fund portfolio

Indian equity markets have corrected considerably and created a lot of jitters.

So how should investors build a solid mutual fund portfolio? What are the common mistakes to avoid? And which are the top mutual funds that investors can invest into amidst this market fall? To discuss this, CNBC-TV18 spoke to Kirtan Shah, Founder & CEO of Credence Wealth Advisors.

Shah said diversification is the biggest advantage while building a portfolio but added that investors don’t need more than 5-6 schemes to build a good diversified portfolio.

“When investors build a portfolio they look at diversification as the biggest advantage. Some investors have 20 to 100 schemes in which they have invested thinking that more the number of schemes, the more the diversification. However what happens is each scheme has 30-50 stocks and if you have bought 20 schemes, you have invariably bought a BSE 500 portfolio. So how will you reduce risk or generate better risk adjusted returns? So investors don’t need more than 5-6 schemes to build a good diversified portfolio.”