It seems that investors believe that there is an optimum number of mutual funds to own. But, like prunes there is no magic number. The right combination depends on the individual. Still there are some rules of thumb that help make sense in selecting from among the over 10,000 funds for sale. You Should Own 1.
Mutual funds have minimum buys.
You simply can't get into a fund for less than its minimum. If you have more money to invest, there are good reasons to choose a number of funds, even if you have found a great performer. Managers can leave and your fund can face a bumpy ride until a new guru shows up. Fidelity Magellan floundered under several managers after superstar Peter Lynch left the fund. You also want a number of funds for diversification.