You’re diversified across accounts. Are you diversified across risks?

Five accounts. Three advisers. One question: how much of your wealth depends on the same things going right?

A family may hold mutual funds through two platforms, direct shares with a broker, deposits at three banks, two properties and stock awarded by an employer. Every account appears separately. The risks do not.

Two large-cap funds can own many of the same companies. Direct shares may repeat those holdings. A second flat in the same city adds another asset, but it remains exposed to the same local property market. Employer stock rises and falls with the company that already pays the household’s salary.

The portfolio looks busy. Its outcomes may still depend on a short list of businesses, sectors and places.

1. Accounts tell you where the wealth sits

An account is an administrative container.

A demat account records securities. A mutual-fund folio records units. A bank account holds deposits. An employee equity portal shows RSUs or options. A property document establishes ownership.

Counting those containers answers useful operational questions:

• Where is the money?
• Who manages it?
• Which family member owns it?
• Which nominee is recorded?
• Which accounts need attention?

It does not show what drives the value of the assets inside them.

Three equity funds do not automatically create three distinct exposures. Two apartments do not necessarily create geographic diversification. Several bank deposits may still sit within one banking group or share the same interest-rate environment.

The account list is the beginning of the review, not its conclusion.

2. Mutual-fund overlap is measurable

SEBI requires mutual funds to publish their scheme portfolios, including the ISIN, market value and weight of each security. The disclosures are available through fund-house websites and AMFI. Investors can therefore look through the fund name and see the companies it owns.

SEBI’s current methodology for measuring overlap between two schemes works security by security. For every company held by both funds, take the lower of its two portfolio weights. Add those minimum weights together.

Suppose Fund A has 8% in one bank and Fund B has 6% in the same bank. That company contributes 6 percentage points to the overlap. Repeat the calculation for every shared security.

This is more useful than comparing scheme names. A large-cap, flexi-cap and value fund may follow different mandates while still owning several of the same large businesses.

An investor should then add direct shares to the picture. Owning a company through two funds and again in a demat account creates one combined exposure, even though it appears on three statements.

AMFI’s consolidated account statement can bring mutual-fund holdings across fund houses into one document. The next step is to look through the schemes and aggregate the underlying companies.

3. Sector concentration can hide behind different company names

A portfolio can hold many companies and still depend heavily on one industry.

Three banks, a housing-finance company and a financial-services fund carry different names. They may respond to some of the same forces: credit growth, interest rates, asset quality, liquidity and regulation.

The same issue appears when a household owns an IT-sector fund, shares in technology companies and employer stock from an IT business. The securities are different. Their business conditions may be closely related.

FINRA describes this as concentration arising from correlated assets. Investments in the same industry, region or security type can move together because they respond to common events.

A useful exposure report groups holdings twice:

• by the company or security; and
• by the economic driver behind it, such as banking, technology services, real estate, government rates or one geographic market.

The second view often reveals what the account list misses.

4. Property belongs in the same calculation

Financial dashboards commonly stop at listed investments. That can understate the household’s largest exposure.

The National Statistical Office’s 2019 All India Debt and Investment Survey measured household assets as of 30 June 2018. It found that physical assets dominated average household wealth. In urban India, the average value of physical assets was ₹24.65 lakh, compared with ₹2.52 lakh in financial assets.

Those figures describe a national sample from 2018, not today’s HNI portfolio. They still show why a concentration review that excludes property can give a distorted answer.

Property exposure includes more than its estimated sale value. A whole-wealth view should record:

• city and neighbourhood;
• residential, commercial or land use;
• outstanding loan;
• rental income;
• ease of sale;
• ownership among family members; and
• links to the owner’s business or employment location.

Two properties in Bengaluru may be two legal assets and one geographic exposure. A home, an office and a family business property in the same city can all weaken together if local demand or financing conditions change.

Property also introduces liquidity risk. A household may appear wealthy while having little capital available without selling or borrowing against a large asset.

5. Employer stock can connect income and wealth

Employee stock needs special treatment because the employer may already provide the household’s salary, bonus, health cover and future vesting.

If the company struggles, several things can happen together: the share price can fall, unvested awards can lose value, bonuses can shrink and employment can become less secure.

FINRA calls a large holding in one stock concentration risk and advises employees to evaluate company shares held across all accounts, including workplace retirement plans.

For an HNI or senior employee, the review should include:

• vested shares;
• unvested RSUs;
• options and their exercise prices;
• shares held in another brokerage account;
• future grants that are likely but not yet awarded; and
• household income that depends on the same employer.

Unvested awards are not equivalent to cash or listed shares already owned. They still matter when assessing how much of the family’s future wealth depends on one company.

6. Build an exposure map before discussing allocation

There is no universal concentration percentage that suits every household. A founder, senior executive, property owner and retired investor can have very different constraints.

The first job is measurement.

Start with one household balance sheet covering bank deposits, bonds, mutual funds, direct shares, PMS and AIF holdings, private-company interests, employee stock, property, gold, liabilities and the main sources of household income.

Then tag each asset by the risks that matter: underlying company, sector, geography, currency, liquidity, credit quality, duration and links to household income.

The result will not produce a single perfect diversification score. It will show which events affect several parts of the household at once.

7. Ask what can go wrong together

A concentration review becomes clearer when framed as scenarios:

• Which assets suffer if one employer has a difficult year?
• How much of the equity portfolio sits in the ten largest underlying companies?
• Which sectors appear through funds, direct shares and employee awards?
• How much wealth depends on one city’s property market?
• Which assets could be sold within a week without a large discount?
• Which accounts are in different places but hold the same securities?
• Does household income depend on the sector that dominates its investments?
• Which exposures are missing because one adviser cannot see another adviser’s accounts?

These questions do not prescribe what the household should sell or buy. They show where one event can reach several accounts at once.

Five accounts may represent five genuinely different exposures. They may also be five windows onto the same risk.

The only way to tell is to put the whole balance sheet in one view and look through the account names to what the family actually owns.

We post the charts behind these pieces on X (@revaprivate) and LinkedIn, and every new piece on our WhatsApp channel. Follow along to get them first.

Questions

Does owning several mutual funds mean my portfolio is diversified?

No. Different schemes may hold many of the same securities. Compare their disclosed portfolios and aggregate common companies across all schemes and direct holdings.

How is mutual-fund overlap calculated?

SEBI’s methodology compares the weight of every common security in two schemes, takes the lower weight for each shared security and adds those weights together.

Should property be included in a concentration review?

Yes. Property can form a large part of household wealth and may create geographic, liquidity and borrowing exposure that a securities-only report misses.

Why is employer stock different from another shareholding?

The employer may provide both the household’s income and its stock awards. A problem at the company can affect salary, job security, vested shares and future grants together.

Is there an ideal maximum concentration?

This article does not set one. The relevant limit depends on the household’s goals, liquidity needs, tax position, income, liabilities and ability to tolerate loss.

What is the first step?

Create one household balance sheet, look through each fund to its underlying holdings and tag every asset by company, sector, geography, liquidity and income connection.

Sources

1. SEBI: portfolio-overlap methodology
2. SEBI: mutual-fund portfolio disclosure requirements
3. AMFI: portfolio disclosures
4. AMFI: consolidated account statement
5. NSO: All India Debt and Investment Survey 2019 findings
6. Investor.gov: asset allocation and diversification
7. FINRA: concentration risk
8. FINRA: questions employees should ask about stock awards

Compound is analysis, not investment advice. Reva Money is not a SEBI-registered investment adviser.