A growing number of Indian investors believe they are protected from market swings simply because they hold multiple financial products. But financial planners warn that having different assets is not the same as being truly diversified.
A recent example shared by CA Abhishek Walia, co-founder, Zactor Money,
Walia recalled a client who visited him last month, confident that her investments were well-balanced.
Her — a list that normally suggests healthy diversification.
But there was one major issue.
According to Walia, “70% of everything she owned was linked to the same risk: Indian equity.”
In simple terms, if the Indian stock market fell sharply, most of her investments would fall with it.
Walia explained that many people assume holding more products equals better protection. However, the real measure of diversification lies in how differently the assets behave during market ups and downs.
“If every asset falls when one thing falls, you’re not diversified,” he said. “You’re just collecting products.”
This is what was happening in the client’s case—the investments looked varied on paper, but their movements were tied to the same market trend.
Walia restructured the portfolio by spreading the investments across assets that do not move in the same direction. This included adding global exposure, debt instruments, and other options that balance equity-heavy risks.
Once the changes were made, the impact was immediate.
“Her returns became calmer. Her volatility anxiety dropped. And she finally saw that stability can be engineered – not hoped for,” he wrote.
True diversification is not about how many products you hold, but how differently each of them behaves in various market conditions. Walia concluded his post by saying, “Diversification isn’t about having many assets. It’s about having uncorrelated outcomes.”