Investment experts generally agree that five to eight mutual funds are sufficient to cover any investor’s desired risk and return. Ideal fund types for a diversified portfolio:

CORE PORTFOLIO:
A good, basic mix includes one large-cap fund (or an index fund based on the S&P 500) and a mid-cap, small-cap, international, and bond fund.

TWEAKING THE CORE:
To further diversify your core portfolio, you could split the large-, mid-, and small-cap investments between growth and value funds. Put no more than 30 percent of your funds in any one asset class.

Tip for paying less for more shares
When investing a large sum, you’re generally better off using a slow-but-steady approach known as “dollar cost averaging.” By investing a fixed amount at set intervals over time—regardless of market conditions—you’ll buy more fund shares when prices are lower and fewer when prices are higher. When you’ve finished investing the lump sum over time, you will have paid a lower average price per share. So, if you take a year to invest a lump sum periodically, you’ll avoid the risk of buying all of the fund shares when they were most expensive.