'Diversification helps during volatile times'

With over 17 years in financial markets, Bhavesh Jain brings a wealth of perspective to portfolio construction. The co-head of factor investing at Edelweiss Mutual Fund emphasises the importance of appropriate diversification based on investment amount and investor profile. As a fund manager overseeing multiple risk-adjusted returns strategies and ETFs, Jain has developed strong views on asset allocation. He distinguishes between equity's volatility and debt's risk and explains why safety should be prioritised over returns in fixed-income investments. In this conversation, Jain discusses the benefits of multi-asset portfolios during volatile markets, explains why most retail investors should maintain a well-diversified approach and shares his guidelines for constructing resilient portfolios. Below is the edited transcript of our discussion. Why is it important for investors to hold a diversified portfolio across multiple asset classes? What are the pros and cons of having such a diversified portfolio? I think the last few weeks would have made it very interesting for people to understand the real importance of a diversified portfolio. The volatility has increased in the last couple of weeks due to tariff announcements. Investors may have learned that some allocation to debt could have helped them recently. We have also seen gold moving up in the last couple of months. Therefore, a multi-asset portfolio is beneficial as it provides investors with exposure to commodities like gold and silver, as well as equities and debt. In such volatile times, diversification helps you in a big way, and we suggest investors have a diversified portfolio. That said, diversification beyond a point is not required, particularly when the investment amount is minimal; it is not the right time to venture into a multi-asset strategy. Multi-asset allocation is for investors with large portfolios who can't have a significant weight in a single asset class, so they need to diversify. For most retail investors, I think simple equity products are good enough, along with some fixed-income exposure, to meet emergency and liquidity requirements. Equity as a standalone is a beneficial product to beat inflation, but diversification is essential for high-net-worth individuals (HNIs), ultra-HNIs and family offices, especially because their investment amounts are huge. The multi-asset approach will help them preserve capital rather than just chase returns. In the last year, equity has given flattish returns, but gold and silver are up 30-40 per cent, giving ultra-HNI or HNI clients an edge. Retail investors, I think, should continue their systematic investment plan (SIP) with equity, create a base by accumulating a decent corpus and then they can venture into international equities, gold, silver and other asset classes. How do diversified portfolios help protect investors during tough times like n