The Hidden Cost of Overdiversification: Insights from Kresha Gupta
Date: June 10, 2026
"Diversification is a tool to manage risk, not an investment strategy to generate returns," says CA Kresha Gupta, Director and Fund Manager at Steptrade Capital.
According to CA Kresha Gupta, Director and Fund Manager at Steptrade Capital, owning too many mutual funds can quietly destroy your long-term wealth. She warns that investors often mistake a larger portfolio for a safer one, noting, "diversification is a tool to manage risk, not an investment strategy to generate returns." When you blindly accumulate assets, your portfolio simply mirrors average market returns and gets dragged down by hidden costs. As Gupta highlights, "costs creep up through expense ratios and transaction fees without delivering better risk reduction," making it harder to track performance or efficiently rebalance your wealth.
The root cause of this portfolio clutter is often duplicate exposures driven by impulsive investing. Gupta explains that "in India, we now have many ETFs and countless mutual fund schemes, so investors often end up holding three or four large-cap funds that own the exact same top stocks." Because this dilution drags returns toward mediocrity, she advises investors to prioritize asset quality over sheer volume. Ultimately, a clean, high-performing portfolio requires breaking the habit of passive accumulation, because as Gupta concludes, "most overdiversification happens through accumulation over time — one SIP here, one tip there."
source : www.indiatoday.in