During the covid-19 pandemic, a batchmate from IIM-B reached out for help. He’s as accomplished as they come—senior partner at a consulting firm, sharp business acumen, substantial wealth accumulated over years of smart career moves. But when I reviewed his portfolio, what I found was unsettling.
Despite his success in building wealth, his investment portfolio told a different story – I saw scattered investments, consistent underperformance and fees that were quietly eroding his returns.
That conversation became the catalyst for everything that followed. Sahil, Vaibhav, and I couldn’t shake a simple realisation: if someone this capable was struggling with portfolio management, how many other wealth creators were facing the same challenges? This question led us to start Dezerv.
Soon, we launched the Dezerv Wealth Monitor app to help investors review and analyse their mutual fund investments in an unbiased data-backed approach.
Over the past few years, we’ve analysed more than 500,000 portfolios. What emerged from this extensive analysis was a clear pattern: seven recurring mistakes that consistently appear in the portfolios of India’s most successful investors.
In this edition of the Create Newsletter, I want to delve into these common mistakes that are wealth destroyers.
We’ll cover:
- The 7 critical portfolio mistakes we discovered
- Real impact of each mistake on wealth creation
- Actionable solutions to fix or avoid them
- How to conduct your own portfolio health check
Let’s dive in.
Why am I dedicating an entire newsletter edition to the seven most common mistakes I have seen investors make?
Because, each mistake has a real, measurable impact on long-term wealth creation. For a portfolio of ₹2 crores, these mistakes can cost anywhere from ₹10 lakhs to ₹50 lakhs over a decade. For larger portfolios, the numbers become staggering.
If there’s one thing I have learnt over the years, it is this: you do not fix a portfolio by chasing better returns. You fix it by first understanding the mistakes.
So, lets go through these mistakes that investors make when it comes to mutual fund investments –
Mistake #1: The performance illusion: Missing the real picture
Most investors focus solely on absolute returns and feel content. However, absolute returns do not give a complete picture of your returns. While looking at your portfolio returns, comparing your funds performance to the corresponding benchmark gives an accurate picture. A benchmark is essentially your performance yardstick (Nifty 100 for large cap, Nifty Midcap 150 for mid-cap funds and so on).
Here’s a visual representation to put this missed gain into perspective –
That difference is more than underperformance. It is the cost of missed potential a.k.a opportunity cost. Opportunity cost is often the biggest drain on long-term wealth.
This wealth left on the table could add significant comfort to your life – help you buy a home faster, afford to take a sabbatical or even help you send your child to a reputed university overseas.
That is what makes underperformance so dangerous. The portfolio grows. So it does not feel like a loss. But what you miss is the compounding effect that could contribute to your wealth creation.
To avoid making this mistake, you need to identify the right benchmark for each fund and ensure you or your wealth manager are comparing the performance of each investment to its appropriate benchmark.
Mistake #2: Overdiversification
When we reviewed the mutual fund portfolio of a 58-year old business owner from Pune, through Dezerv’s Wealth Monitor, we discovered that he had 128 funds across 24 mutual fund houses. In his review he told us that he wanted to “reduce risk by investing across multiple funds”. He then also admitted that a significant portion of his portfolio grew over time as he had accumulated multiple funds from different intermediaries. While the objective was to reduce risk, the result was poor – Same market movement, same risk, marginally less returns.
Here’s a snippet from his mutual fund portfolio review through Dezerv Wealth Monitor.
Many investors overdiversify their investments without understanding the impact on the performance. But, more funds ≠ better returns.
Here’s the truth.
Beyond 8-10 funds, each new addition:
- Increases overlap of underlying instruments
- Makes your portfolio harder to manage
- Incurs active management cost, while having exposure to almost the entire broader market
Think of it this way: If you have 15 large-cap funds in your mutual fund portfolio, they have a large overlap of the underlying companies. You’re not spreading risk; you’re just paying multiple fund managers to do the same job.
Your action plan to avoid making the overdiversification mistake
- Limit your total funds to 8-10 across different categories and styles
- Focus on funds that complement each other rather than similar funds doing the same job
- Regular portfolio cleanup during reviews
Mistake #3: Under-diversification
We often see mutual fund portfolios gravitate towards one dominant belief. It can be an asset class, a theme or a category of funds. A single conviction grows quietly into overexposure.
A few months ago, we reviewed a ₹4 crore mutual fund portfolio for a senior executive at an FMCG brand. She had put all her life savings in equity mutual funds. Nearly 72% of her investments were in global funds. The risk concentration was off the charts. She was looking to replace her old car in 1 year, enrol her son in a top school in Delhi in 1.5 years and get some liquidity to exercise her vested ESOPs.
One macro trigger or bad cycle, was all it would take to wipe out years of compounding and impact all her important life goals.
This is the trap of under-diversification. It hides behind performance. Conviction begins to feel like a strategy. Until the cycle turns.
How to avoid under-diversification:
- Limit single-stock exposure to 5-10% maximum
- Diversify across asset classes – equity, debt and gold
- Geographic diversification through international exposure
- Time diversification through systematic investing
- AMC diversification across fund houses
Mistake #4: The DIY and friends/ family fallacy
Quite often investors either make their own investment decisions or rely on recommendations by friends and family.
Why DIY investing seems attractive as you think you are saving on fees by investing yourself, it fails in practice because:
- Time constraints – Investing is a full-time activity
- Lack of knowledge – Markets are complex and evolving
- Emotional decisions – Fear and greed override logic
- No accountability – Easy to abandon discipline
The friends and family fallacy
Acting on advice from others who aren’t full-time professionals is counterproductive because:
- It’s not suited to your risk appetite and time horizon
- They’re not accountable for your outcomes
- They have their own biases and limitations
This is how I look at DIY investing vs guided investing. As your income and investments grow, approaching a wealth manager may be prudent.
While you focus on your career and profession, a professional wealth manager’s full-time job is to grow your wealth. They provide:
- Behavioural guidance – Keeping emotions in check
- Disciplined approach – Staying the course during volatility
- Continuous monitoring – Adjusting as needed
- Accountability – Responsible for your outcomes
When experienced professionals help you stay the course, you harness compounding’s full power.
What you need to do –
- Evaluate your commitment – Can you truly dedicate the time and discipline needed for DIY investing?
- Understand the true cost – Whether DIY or professional, know what you’re paying for
The question isn’t whether you can invest on your own. The question is whether you can stay disciplined when it matters most.
Mistake #5: The fee phobia
“I don’t want anyone to benefit from me through fees. I’d rather manage my own money.”
Sound familiar?
Here’s the brutal reality: There will always be costs related to investing. There are multiple costs associated with mutual fund investing like expense ratio, exit load and capital gains tax and fees, if you consult a wealth manager.
We have seen innumerous investors, who have paid the price of focusing only on minimising costs. Often, there is a hesitance to take professional help due to the fees.
I have a slightly different take here. In my opinion, being “cost-conscious” can be even more expensive. So, here’s a smarter way to think about costs – instead of asking: “How can I pay zero fees?” Ask: “How can I ensure my returns outweigh my costs?”
While experts charge a fee to manage your money, they also bring with them knowledge, experience across market cycles and the ability to manage your investment behaviour in a disciplined manner.
It’s important to ensure that your potential returns outweigh the costs while making any transaction. Smart investors don’t chase zero fees, instead they chase maximum net returns. If you work with an advisor, the critical question isn’t “How much do you charge?” It’s “How are your interests aligned with mine?”
Good fee structures:
- Performance-linked fees
- Transparent fee structure
- Clear value proposition
Red flags:
- Hidden commissions
- Churning for transaction fees
- Misaligned incentives
In investing, as in life, you get what you pay for. The trick is making sure you’re paying for the right things.
Mistake #6: Poor asset allocation
Poor asset allocation is when the mix of equity, debt, and other asset classes doesn’t align with your goals, time horizon, or temperament.
And it shows up in two deadly extremes:
Story 1: A 35-year-old still far from retirement, investing entirely in fixed deposits and short-term debt. Chasing safety when time is on his side. Letting inflation quietly erode compounding potential.
Story 2: A 60-year-old retired person, holding 75% in small and midcap stocks. Riding momentum without a margin of safety. One sharp correction away from derailing his retirement fund.
Both are common. Both are misaligned. Both are disasters waiting to happen.
Yet, most investors spend the majority of their time on stock/fund picking and timing decisions while ignoring their foundational allocation strategy.
The right allocation means:
- You can sleep peacefully during market crashes
- You don’t panic-sell during corrections
- You stay invested for the long term
The wrong allocation means:
- Constant anxiety about market movements
- Emotional decisions during volatility
- Abandoning your plan at the worst times
- Missing out on the magic of compounding
Right asset allocation has the potential to help you sleep better at night.
Your asset allocation plan –
- Define clear time horizons for different goals
- For goals that are long-term in nature, you can take higher risk with higher equity exposure, whereas for goals that are mid to near-term, add an element of stability through fixed income allocation
- Regular rebalancing to maintain target allocation
- Dynamic adjustment based on market conditions and life changes
Mistake #7: Autopilot investing
Most investors make one of two critical mistakes: they either ‘invest and forget’, or they constantly react to news—switching funds, chasing themes, booking profits at every turn.
Both approaches miss the same crucial element: steady, active oversight and rebalancing. A portfolio without regular oversight is like a ship without navigation—it may stay afloat, but it slowly drifts off course.
When to rebalance:
- Asset allocation drifts beyond 5-10% from target
- Significant life changes (marriage, kids, job change)
- Major market movements which create opportunities
When not to rebalance:
- Reacting to daily news
- Chasing last year’s winners
- Emotional responses to volatility
Your portfolio needs to adapt with changes in your risk appetite, investment horizon, financial goals, and market conditions. This requires systematic oversight, not emotional reactions.Here’s your immediate action plan to identify these mistakes in your own portfolio:
In summary
Having reviewed lakhs of mutual fund portfolios, personally and through Dezerv Wealth Monitor, I believe your investment outcomes are driven by investment behaviour. Poor behavioural choices can cost investors. We have seen lakhs of rupees lost over time through panic selling, chasing performance, or frequent portfolio changes.
This is why regular portfolio reviews are crucial. They serve as your behavioural guardrail, keeping you disciplined when emotions run high and markets turn volatile. The best investment strategy is one you can stick with, and regular reviews ensure you’re actually capturing the returns you’re working toward.
Want a review that will help you identify the underperformers in your portfolio?
This is exactly what the Dezerv Wealth Monitor is built for. It helps you understand where your mutual fund and stock investments stand —what is working, what is not, and what needs attention.
If you have been meaning to take a closer look, start here. It’s free, takes less than 5 minutes, and provides a comprehensive analysis of your portfolio health.
Review your portfolio using the Wealth Monitor by downloading the Dezerv app now!
Disclaimer:
Our licenses: Dezerv Investments Private Limited is a Portfolio Manager with SEBI Registration no. INP000007377 and also acts an Investment Manager to Dezerv Innovation Fund, Category – I AIF-VCF-Angel Fund; Dezerv Private Equity Fund and Dezerv Alternatives Trust, Category II AIFs bearing SEBI Registration no. IN/AIF1/22-23/1066; IN/AIF2/23-24/1331 and IN/AIF2/23-24/1345 respectively and Dezerv Alpha Equity Trust, a Category III AIFs bearing SEBI Registration no. IN/AIF3/23-24/1467 (Collectively referred as “Dezerv”).
Mutual Fund distribution services are offered through Dezerv Distribution Services Private Limited, a wholly owned subsidiary of Dezerv Investments Private Limited (collectively referred to as “Dezerv”) with AMFI Registration No.: ARN- 248439.
Disclosures: The information provided herein is intended solely for educational purposes and should not be construed as solicitation, advertising, or providing any financial or investment advice or an offer to buy or sell any financial instruments. All investments, including mutual funds, are subject to market risks. Read all the related documents carefully before investing. Readers are advised to consult with a certified financial advisor before making investment decisions based on the information provided herein
In the preparation of this article, Dezerv has used information developed in-house and publicly available information and other sources believed to be reliable. The information contained in this article is for knowledge purposes only and not a complete disclosure of every material fact and terms and conditions. While reasonable care has been made to present reliable data in this article, Dezerv does not guarantee the accuracy or completeness of the data. The information / data herein alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy.
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