I see no problem with 40 to 60 or more separate funds or investments. My guess is that you don't need to even look at 90% of them except once every few years. But modern tools like M* X-ray, MSMoney, Quicken or even Excel makes tracking all the different investments pretty trivial.
You may take a hit on expense ratio. For example, we own VFSTX (short-term bond) in 3 different accounts. If we could get them into one account, we could get the lower expense ratio share class and save about $100 a year. Alas, aggregation is not possible because the accounts (IRAs) cannot be aggregated.
Another danger is that a small holding will have a loss and you will not want to sell it because it is so tiny compared to your other assets. So it lanquishes even though you could put the money to use elsewhere.
Some folks write, "If it's less than 5% of your assets, why bother with it?" And that is a fair criticism. If a holding of 0.5% doubles in value, that means your performance is only up 0.5% that year. It makes you feel good because you can forget about the asset that's 20% of your portfolio that dropped 10% and cost you 2% towards your overall performance, "Man, I had XYAXX double last year. I really know how to pick 'em!"
