Many investors mistakenly believe that holding numerous mutual funds will enhance diversification. However, this approach can result in overlapping investments, particularly in large-cap and flexi-cap categories, leading to diluted returns and increased costs due to multiple expense ratios. Analysts like Nikunj Saraf, CEO at Choice Wealth, emphasize that a portfolio cluttered with too many funds complicates tracking and rebalancing, ultimately resulting in average returns that defeat the purpose of active fund selection. Experts suggest that 4 to 6 mutual funds is the ideal number for most retail investors in India, allowing for adequate coverage of distinct asset classes and investment categories. Jitendra Solanki, a Sebi-registered research analyst, supports this view, stating that five funds can effectively cover the entire market. A well-structured portfolio should include a mix of large-cap, flexi-cap, mid-cap, multi-asset, and possibly gold funds, ensuring that each fund serves a unique purpose without redundancy. Investors are advised to consult certified experts before making investment decisions.