Quick self-check for a Rs 80L portfolio: how do someone if their overall setup is actually healthy?

If your portfolio suffers extreme drawdowns, is dominated by a few assets, or costs over 0.75% annually, its fundamental structure needs an overhaul.

If your whole wealth has fallen more than about 10-15% in a bad phase, if two or three asset classes dominate it, or if your total costs exceed about 0.75% a year, those are strong signals that the structure needs work. To test your diversification, count not how many funds you hold but how many asset classes or sub-asset classes you hold.

If just two or three of them dominate your wealth, whichever they are, it usually means you don't yet know how to access other asset classes or how to mix them. When evaluating this, look at your overall portfolio, meaning all your wealth together, not just the equity part.

Very few people genuinely have the appetite or willingness to sit through more than a 15% drawdown. If you have seen a 28% fall on the whole portfolio, either you are that rare person or something in the design is off, and the sleepless weeks you describe suggest it is the second case.

Remember that falls hurt more than gains help, as a one-third fall needs a 50% gain just to get back to the start, making drawdown sensitivity matter more than upside obsession. To evaluate your costs, add up everything you pay to manage your money, including expense ratios, commissions, PMS fees, and advisory fees.

In today's environment, if the total crosses about 75 basis points, roughly 0.75% a year, something is probably being done inefficiently. Nobody can reliably target a return, and if someone says they will deliver 20% with high probability, that is simply not credible.

What you can target is risk, which means managing the maximum likely drawdown, the overall volatility, and how different your holdings are from each other. If you learn to see and understand risk, returns tend to follow.

One may consider running these three tests every quarter as part of a calm review. If you fail the drawdown test like in your COVID experience, the usual fix is not chasing better funds but adding genuinely different asset classes so one shock doesn't hit everything at once.

Cost, diversification, and drawdown are the three numbers that tell you more about your portfolio's health than last year's returns ever will.

Based on Himanshu's podcast with Sachin: https://foliyo.ai/blog/investing-isnt-enough-managing-your-wealth/
Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.