“Diversify your equity portfolio by investing in US-focused mutual funds” is something you must have read or heard time and again, especially when Indian equity markets are more volatile than usual.
This well-meaning piece of advice is based on the conventional wisdom that diversifying an investment portfolio across different markets can reduce the overall risk and volatility, as these geographically and economically diverse markets are not expected to move in tandem. Sounds good, right?
But there’s a small problem. I’m not sure how effective geographical diversification is anymore, courtesy- financial globalisation.
