Before we move ahead, it helps to reflect on what we have actually established so far.

To begin with, participation in equity markets in India is still relatively limited. Estimates suggest that only about 9–10% of Indian households actively invest in markets. And within that already small group, the number of investors who hold assets outside India is even smaller. Roughly 2–3% of Indian investors currently invest globally.

So even among people who already invest, global exposure is still uncommon.

The second point is about what we usually mean when we say we are diversified.

For most investors, diversification simply means spreading money across different types of investments. For example:

• Fixed deposits
• Mutual funds
• Direct stocks
• Gold
• Real estate

This approach makes sense. Holding different asset classes can reduce product-level risk. If one investment underperforms for a period, another may behave differently.

But there is another layer to diversification that often goes unnoticed.

Most Indian investors keep the overwhelming majority of their investments within India. That is completely natural. We earn in India, understand Indian companies better, and follow Indian news and policy developments more closely. Investing locally simply feels more familiar.

This tendency is not unique to India. In behavioural finance, it is called home-country bias. Investors around the world display it. Americans tend to invest mostly in the US, Japanese investors focus heavily on Japan, and Indian investors largely stay within Indian markets.

There is nothing wrong with this instinct. But it does mean that an important dimension of diversification often remains unexplored.

As we move into the next chapters, we will expand the idea of diversification through three specific lenses.

These three ideas will guide the chapters that follow.

In the next sections, we will look at each of them more closely and see how they shape diversification for a long-term investor.