NEW YORK (CNN/Money) - If you're doing everything right as an investor -- let's say you're socking it away for retirement, setting money aside for your children's college education and even slipping some money into a rainy day fund -- well, good for you.

However, you may find yourself, as so many people do, with too many mutual funds to keep up with. What should you do?

If you can't remember the names of all the funds you are invested in, then you have too many!

While the average U.S. household holds just four, according to the Investment Company Institute, plenty of investors have dozens when you add all their accounts together. And who can blame investors for choosing too many, when there is a universe of about 8,300 mutual funds out there?

One way to decide what's right for you is to consider your own goals. Are you simply investing in a 401(k)? Then keep it simple.

CNNfn's Gerri Willis shares five tips on how to simplify your investments. Play video (Real or Windows Media)

Financial advisor Dee Lee suggests making it easy by going with a 6-pack approach. One large-cap fund, one mid-cap, a small-cap, throw in an international fund, a bond fund and finally a money market fund.

For the more advanced investor with multiple savings goals, Jonathan Pond, Financial Planning Information president, says a well-diversified portfolio typically consists of owning 15 to 20 funds.

Check out how the fund is doing compared to its peers. Pond says assuming you picked a decent fund to begin with, a good rule of thumb is not selling it until it underperforms its peer group average for two years in a row. The emphasis here is on peer group. If your fund is a technology fund you don't want to compare its performance with the broader market.

Once you can differentiate between the groups, check out CNN/Money's mutual fund screener to figure out whether your fund is up to snuff.

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Keep in mind that funds will periodically underperform and then more often than not come roaring back. Therefore, don't move in and out of funds just to get into whatever may be the "hot" sector at the moment.

You'll also want to check if the fund is in the hands of a fund manager who trades frequently. If so, you may find yourself at the end of the year with a lot of short-term gains you'll have to pay income tax on.

At Morningstar.com you can look for the "turnover ratios" of a particular fund. This is how much buying and selling a fund does each year. A low turnover ratio leads to greater tax efficiency because your fund manager isn't selling stock within your portfolio as often. Funds that have a turnover of 100 percent are basically buying a completely new set of stocks every year.

Turnover should ideally be lower than the average of 80 percent. And index funds can have turnover as low as 5 percent.

Sometimes you may not want to sell any of your mutual funds because you find they are all doing well. So, how do you pare down?

Do some research. You may find they are all doing well because they hold the same stocks. For example, you may own 40 mutual funds, but 30 of them might be growth funds that probably contain the same stocks. If you buy an S&P 500 stock index fund and a large cap growth stock fund, there is a high likelihood that both will hold a big chunk of Microsoft stock.

If you are convinced that it is time for you to cut back on the number of funds you own, take a close look at your portfolio in its entirety. Log onto our Portfolio Manager. Or check out Morningstar.com, which also has a portfolio X-ray overview tool that gives you an inside look at your portfolio: How much you have invested in each sector, and if you are largely overweighted in a particular area.

When figuring out which funds to part ways with, look for the ones that are taking the most out of your pocket.

Figure out the fees you are paying for each, namely, the expense ratio. This is simply the percentage of fund assets that cover administrative and miscellaneous costs. That means everything from advisory fees to the printing and postage for the prospectus.

An appropriate expense ratio to pay is about 1 percent. Check out the 12b1 fees, which are the marketing fees funds charge to advertise their wares. Lee suggests dumping any fund that charges marketing fees.

Also realize that if you decide to let a fund go, some fund managers may hit you with an exit fee.

Remember last year's mutual fund scandal? Well, it's not over yet, and when you're pruning your mutual fund portfolio, you might as well consider getting rid of funds run by companies that are under scrutiny by regulators.

You also want to keep an eye on the size of the fund. Size refers to the total amount of money a fund manager has under his supervision and has to invest. One thing to keep in mind is that as a fund increases in size, its fees should decline because it will most likely have more income.

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However, there is a negative here. As a fund gains in popularity, more and more investors will pour cash into the fund. And the fund manager will then have to put that large amount of cash to work.

In order to do this, he or she may purchase additional shares of stock that could change the original goal of the fund. For example, small-cap funds usually consist of a few number of stocks and are thinly traded. But if there is a great deal of new money, the fund manager may have to buy more and larger-caps to keep returns up, and suddenly you'll find yourself owning yet another mid- or large-cap fund.

Gerri Willis is a personal finance editor for CNN Business News. Willis also is co-host of CNNfn's The FlipSide, weekdays from 11 a.m. to 12:30 p.m. (ET). E-mail comments to 5tips@cnnfn.com.