Everything That Shines Isn’t Meant for Your Portfolio

Mohit is an IT professional in his mid-30s.

One evening, a YouTube recommendation nudges him into the world of early retirement. FIRE at 40. Financial freedom. Passive income. The algorithm does its job well. A few videos turn into binge-watching. Podcasts follow. Instagram reels.

The message is seductive and consistent: start investing early, invest aggressively, and freedom will follow.

Motivated and to his credit, genuinely interested, Mohit decides to act.

Day 1: A colleague recommends a Flexi Cap mutual fund over breakfast in the office canteen. Mohit starts with an SIP of ₹2,500.
Day 18: A few weeks later, he notices mid-cap funds have outperformed large caps over the last two years. Another SIP begins at ₹2,500.
Day 35: Soon after, small caps dominate headlines: “40% returns in one year!” He doesn’t want to miss out. Another ₹2,500 SIP follows.

Then comes Silver. Prices have rallied sharply over the past year. With his annual bonus in hand, Mohit allocates a lump sum towards Silver Etf. As the rally continues, Mohit is thrilled to see his investment grow.
As the Gold and Silver trend upward, multi-asset funds suddenly appear on every finfluencer podcast. He starts yet another SIP ₹2,500.

Meanwhile, Indian markets seem sluggish. NIFTY 50 looks flat compared to the dazzling charts of global indices. Brazil, China, US all seem to shine while Indian equity looks meek. Mohit rushes to find an International mutual fund. Most are closed as the industry breached the USD 7 billion limit. All that remains for fresh investments are Overseas ETFs. Expense ratio? Portfolio quality? He barely checks. He just wants to get in before that also closes.

Around the same time, REITs enter mainstream conversation. SEBI clarifies their taxation and asset class → “now taxed like equity.” The headlines sound reassuring. Mohit begins buying ₹1,000 worth of REITs too.

In addition to his existing EPF, PPF, Fixed Deposits, Bonds, and NPS Contributions, Mohit is now investing across:

• Flexi Caps

• Mid Caps

• Small Caps

• Silver Etfs

• Multi-asset funds

• International equity funds

• REITs

If this story feels familiar, that’s because it is.

Mohit is not reckless. He is curious, proactive, and financially aware.

In a world where easy credit, BNPL, and lifestyle inflation are normalised, where people chase European vacations and Instagram sunsets, Mohit is choosing to save and invest. That itself deserves a huge appreciation.

His real challenge isn’t lack of discipline. It's a lack of clarity.

Mohit isn’t buying four flexi-cap funds or duplicating the same exposure blindly. Instead, he is adding whatever is currently in the spotlight to the asset that seems to be working right now. This behaviour is deeply human.

What Mohit is experiencing isn’t a knowledge gap, it’s a behavioural bias stack. Let's understand more of this common behaviour.

1. Recency Bias

We overweight recent performance and assume it will continue.
Small caps delivered 40% last year → they must be good now.
Silver rallied → it will keep rallying.

Data tells a different story. Historically, assets that outperform sharply over short periods tend to mean-revert. SEBI’s own risk-o-meter disclosures repeatedly caution investors against extrapolating recent returns.

2. Fear of Missing Out (FOMO)

“International funds are closing.”
“This REIT tax change is a once-in-a-lifetime opportunity.”

Flexi-Caps are the new Large-Caps. Multi-Asset are the new Flexi-Caps. The headlines continue.

Scarcity, real or perceived, pushes us to act without reflection.

3. Action Bias

Doing something feels better than doing nothing.
Adding a new product feels like progress even if it doesn’t improve the portfolio meaningfully.

4. Outcome Bias

We judge decisions by short-term outcomes. If an asset goes up after buying, we feel validated even if the decision process was weak.

None of these biases makes Mohit foolish. They make him human.

Is Mohit Actually Diversifying? This is an uncomfortable but a necessary question.

True diversification isn’t about the number of products, it’s about:

• Distinct return drivers

• Low correlation

• Clear role in the portfolio

Mohit must ask:

• Does this new asset reduce overall portfolio risk?

• Or is it increasing volatility in search of higher returns?

• What role does this play in my goals for growth, income, stability, and inflation protection?

Without these answers, diversification becomes a collection, not a strategy.

By the time an asset is widely discussed as being “on a rally,” a significant portion of the upside may already be priced in.

This doesn’t mean the asset is bad.
It means expected future returns are lower than past returns.

Valuations matter even for long-term investors.

Before adding anything in a hurry:

• Check valuations relative to history

• Understand downside risk and drawdowns

• Assess whether you can emotionally handle the volatility

If the asset falls 30–40%, will you stay invested or exit in panic?

So what do we do? Before starting a new SIP or buying a trending asset, pause and ask:

1. What problem is this solving in my portfolio?
   (New goal? Risk reduction? Income? Inflation hedge?)

2. Do I already have this exposure indirectly?
   (Many flexi-cap funds already invest in mid and small caps.)

3. What is the worst-case scenario here, and am I okay with it?

4. Is this decision driven by evidence or excitement?

Conviction should come before allocation.

There Is No Perfect Portfolio, Only a Thoughtful One

Even professional fund managers managing thousands of crores make mistakes. Outcomes are only clear in hindsight.

For every decision you take:

• Some people will agree

• Some will strongly disagree

External validation is noisy and unreliable. What matters is:

• A process you trust

• Goals you understand

• Risks you can live with

Instead of seeking approval from strangers online, focus on:

• Comparing returns to appropriate benchmarks

• Reviewing asset allocation periodically

• Making changes based on evidence not emotions

Everything that shines isn’t meant for you.

Not every rally deserves your money.
Not every new product improves your future.

Investing is less about chasing what’s working now and more about consistently doing what works for you.

Mohit doesn’t need fewer investments.
He needs clearer reasons.

And once clarity replaces excitement, portfolios stop looking busy and start looking purposeful.