John Wagonner recommends that it might be best to create a portfolio comprising no more than 5 funds rather than spreading your investments over a large number of funds.

The reasons for this are as follows:

• You will minimize the amount of time you spend worrying about whether to increase or decrease your holdings with fewer funds.
• It costs more to hold a larger number of funds.

Wagonner suggests that it might be better to hold one diversified low-cost index fund as your core holding rather than investing in 12 or more funds.

Three suggestions made for funds that track the US markets are as follows:

• The Vanguard Total Stock fund (VTSMX) which tracks the performance of the MSCI Broad Market Index.
• Fidelity Spartan Total Market Index fund (FSTMX) which tracks the Wiltshire 5000 index.
• iShares R3000 Index (IWV), an exchange-traded fund which tracks the Russel 3000 index.

To diversify your portfolio you should consider:

• A broad-based international index fund, such as T. Rowe Price International Index fund (PIEQX).
• A bond fund, such as Vanguard Total Bond Market (VBMFX) or Dreyfus Bond Market Index Basic (DBIRX).

 Source: MontgomeryAdvertiser.com