Look at your portfolio. Do you hold more than five equity funds or carry fixed deposits in more than five banks? If so, you are probably suffering from compulsive diversification disorder! In this article, we ask a fundamental question: Do you really diversify? If so, how? A la carte portfolio Diversification is a process where you hold investments that do not all decline at the same time. In an ideal world, this means you should create a portfolio that has weakly-correlated assets. So, if one investment declines significantly, another will fall only marginally or move higher. But in the globalised world, it is difficult to create such a portfolio, as all assets are often strongly correlated to each other. In such a situation, the best you can do is to create a portfolio with assets that do not all decline by a large amount at the same time. Yet, that is what happens in a global crisis in 2008. Why? In such times, all asset classes tend to move closely, as in...