Smrekar questions Butler's overall investment philosophy, though. There is little predictability in the markets, so he should have all of his bases covered. That means diversifying among more funds, and swearing off frequent calls to the broker. Just how many funds one needs in a portfolio is a question without an easy answer. Too few funds, of course, can mean inadequate diversification.
Many investors go to the opposite extreme, though, and end up with dozens of funds.
That raises the potential problem that investors might end up paying active managers premium prices for an overall portfolio that essentially looks and acts like a broad-market index. And don't forget the headache that goes along with tracking all those holdings. In Butler's case, Smrekar believes that using seven funds can do the trick. He'd also add two other funds to complement two of the fairly narrow nichefunds that Butler has selected. All four of Butler's current funds can stay in the portfolio.