New Delhi, April 22 -- Many investors, in a bid to diversify, end up stuffing their portfolios with a large number of funds. This action might turn out to be counterproductive.

According to analysts, holding a larger number of mutual fund schemes doesn't guarantee diversification; it can instead lead to overcrowding and overlapping of investments, which may instead hurt portfolio returns.

Instead of adding strength, an oversized portfolio often creates complexity, duplication, and behavioural fatigue, said Nikunj Saraf, CEO at Choice Wealth.

The first and most common trap of holding too many funds is overlapping. This happens when multiple funds end up holding the same large stocks, particularly in categories like large-cap and flexi-c...