Diversification could be hurting your returns substantially

Diversification is blindly accepted as the golden rule of investing by uninformed investors.

But what if I told you it might actually be hurting your returns substantially?

One of the world's most successful fund manager, Peter Lynch, coined the term 'diworsification' for this phenomenon wherein the risk returns on your combined portfolio become worse with each new company you invest in.

Yes, owning too many stocks can dilute the overall portfolio returns.

When you spread your money too thin, your winning stocks won’t have enough power to make a real difference.

Imagine betting on 50 horses in a race and only one wins.

The gain from that one win gets swallowed by the other 49.

You lose sight of your top performers because you are busy managing everything else.

In the stock markets, it’s the same.

Owning too many stocks means you can't track them all properly.

Each company demands attention, and let’s be honest, you only have so much time in the day.

In India, where we have some of the world's fastest-growing businesses, this can cost you big.

You're giving up the chance for a strong, focused bet on a high-growth company in which you have high conviction for a stock that you invested in based on hearsay from that distant relative of yours.

Having 30+ stocks in your portfolio may feel safe, but you miss the magic of a few strong ones transforming your wealth.

Concentration, done right, can be the key to outsized returns.

It’s not about gambling—it’s about conviction.

When you know a stock inside out, you understand its potential, and you can go all in.

And let's face it, nothing feels better than watching your high-conviction investments pay off.

So next time, instead of adding one more stock to your portfolio, ask yourself—will it make a difference and do you have enough conviction on it?

Sometimes, the answer is fewer stocks, more focus, and bigger returns.

Because in the Indian market, the sweet spot might just be a little concentration.

So, analyze your risk profile, your understanding level of the markets, and find the appropriate concentration for yourself that helps you get a good night's sleep.