What's the recommended amount of funds to maintain in your pension or Individual Savings Account (ISA), according to financial advice? [Andrew Oxlade's view]

What's the recommended amount of funds to maintain in your pension or Individual Savings Account (ISA), according to financial advice? [Andrew Oxlade's view]

How many funds are optimal in your pension or stocks and shares ISA? It's a question many DIY investors ponder, especially after a buying spree.

While getting swept up in investing can be thrilling, it's crucial to avoid overburdening yourself with too many funds.

Picking investments is like painting a picture – understanding the world's trends, risks, and growth opportunities better than the next investor – but remember, every stroke counts. Too many can muddle the masterpiece.

But how many is "enough," and how many is "too many"?

Personally, I have five funds for every £100,000 in my pension, but maybe a broader perspective is beneficial. Fidelity, with over half a million DIY investors in the UK, offers us a vast pool from which to draw insights.

Investors hold an average of eight funds if they have portfolios ranging between £100,000 and £200,000. Interestingly, those with larger portfolios seem to resist the urge to accumulate more funds, with the number plateauing at 17 for portfolios of £500,000 and above.

Determining the ideal number of funds is tricky, as it depends on personal goals, risk tolerance, and the investment mix included in a portfolio.

For instance, someone with a decade or more until retirement might want to go all-in on stock market funds, while someone nearing retirement might prefer a portion in bonds to counteract stock market volatility.

Investors may also want diversifying assets like real estate or commodities. A financial adviser can help determine what you require.

Even within stock markets, investors may want a particular regional or country focus. This can lead to acquiring numerous funds, especially if you favor specialist funds over a global tracker fund.

So, here are four questions to ask yourself:

1. Can you truly manage all those investments?
2. Do you have hidden overlaps?
3. Is holding multiple funds more expensive?
4. Would a "simple life" option serve you better?

Managing multiple funds requires attentiveness, especially for actively managed funds, which may demand additional monitoring to safeguard against management changes or fallow spells. Beg the question – are you prepared to invest your time?

It might be beneficial to consider platform research tools and investment lists for a hassle-free, informed decision. Fidelity's Select 50, for example, offers a well-researched selection of funds.

Additionally, be mindful of overlapping investments within your portfolio. Some platforms offer 'X-ray' tools that reveal these overlaps and help identify where you may have multiple holdings in a single company.

Fees are another factor. Active funds can cost as much as 0.75% per year, while passive funds cost much less. Platform fees vary, so ensure that your allocation to numerous funds doesn't significantly impact your overall portfolio performance and add unnecessary costs.

Finally, consider a "simple life" option, such as a single fund that is a ready-made portfolio. DIY-ing is fun, but it's not for everyone. Such funds offer diversification and can be cost-effective. Vanguard's LifeStrategy fund range is an example, featuring funds divided between shares and bonds for various risk levels.

Ultimately, striking a balance between diversification and simplicity is key. Invest smartly, and enjoy your hobby.

1. To achieve a balanced investment portfolio, it's essential to consider the number of stocks and shares funds, pensions, and other investments you hold, as managing too many funds could lead to confusion and higher expenses.
2. In a personal-finance context, it's worth noting that the number of funds an investor holds can vary greatly, with some holding as few as eight funds for portfolios ranging between £100,000 and £200,000, while others may hold up to 17 funds for portfolios of £500,000 and above.
3. When deciding on the optimal number of funds for your pension or stocks and shares ISA, it's crucial to weigh your personal goals, risk tolerance, and investment mix alongside factors like cost, manageability, and the potential for hidden overlaps and additional management duties.

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