We’ve always cautioned against putting all your money in one sector. Because when it’s hot, it sizzles, hut when the tide turns, your portfolio takes the full brunt of the fall. That’s why we usually recommend broad, well-diversified funds that spread your money across sectors automatically. But here’s a tempting thought: what if you mixed and matched different sector funds to whip up your own “diversified” portfolioRs On the surface, it looks smart and balanced. But does this DIY (do it yourself) recipe really beat the simplicity, and resilience, of a single broad-based portfolioRs To find out, we ran a 20-year experiment. Starting October 2005, we imagined an investor putting in Rs 10,000 every month, with an annual 10 per cent step-up. But instead of choosing one index, they split the money evenly across the top 10 sectors of the Nifty 500 using sectoral indices. (Before we dive in, a quick note: we primarily used Nifty sectoral indices, but where they didn’t exist or lacked enough history, we drafted BSE indices as reliable stand-ins). We then ran the same experiment with just one simple index, the Nifty 500 TRI. Since the Nifty 500 can have higher concentration in certain sectors, we also considered the Nifty 500 Equal Weight index, which spreads allocations more evenly across stocks, to see how the final corpus stacked up by September 1, 2025 (see Table 1). The results aren’t a moment of reckoning for any particular side. The DIY portfolio nudged past the Nifty 500 TRI by a slim margin, but lagged its equal-weight sibling by 0.7 per cent per annum in SIP return. In short, handpicking sectors to “build your own portfolio” isn’t a hot-potato idea.
Each sector’s performance
Let’s now examine how each chosen sector fared, highlighting the star performers that drove the DIY portfolio’s gains and the laggards that held it back. In the DIY portfolio, Nifty Auto sped ahead as the star performer, delivering a strong 16.3 per cent SIP return and building a corpus of about Rs 30 lakh, roughly 13 per cent of the total portfolio. On the flip side, BSE Telecom scraped the barrel with just a per cent SIP return, contributing only Rs 13.4 lakh, or about 6 per cent of the overall corpus. One more point to note: Table 2 reveals that among the 10 sectors, five outperformed the Nifty 500’s SIP return of 13.6 per cent, four lagged, and one matched it. Essentially, this highlights the value of sector diversification. While some sectors will outshine the broad market, others may underperform, and together they help generate a balanced, decent return.
Performance during market stress
To test performance during market turmoil (instances when the Nifty 500 TRI dropped 20 per cent or more), we compared how the DIY portfolio stacked up against the Nifty 500 and its equal-weighted sibling during those downturns. We found the DIY portfolio moved much like the Nifty 500 during market downturns. In two of the four major corrections, it fell almost in line with the index, while in the other two it managed to cushion the blow slightly. Compared with the Nifty 500 Equal Weight index, however, the DIY approach fared better overall. The starkest difference came in the 2008 crash, when the DIY portfolio fell about 7 per cent less than the equal-weight index. In other words, it offered significantly better downside protection. So, overall returns from this approach are decent and broadly in line with a diversified index, offering only modest downside protection during market crashes. But is it really worth adoptingRs Let’s take a closer look at the potential drawbacks.
Drawbacks of DIY selection
1. Risk of missing key sectors: Missing out on star performers (which, of course, no investor can predict in advance) can drag down your portfolio. For example, Table 2 showed that Nifty Auto, BSE Capital Goods and Nifty Financial Services delivered the best SIP returns. If these three sectors were excluded and the same monthly investment was split among the remaining sectors, the overall SIP return would drop from 13.9 per cent to 13.1 per cent, shaving about Rs 18.5 lakh off the final corpus. Complexity and maintenance: Managing more funds means more moving parts and added complexity. Also, if your platform doesn’t support automatic step-up SIPs, you’ll be stuck manually adjusting contributions for each sector every year. Behavioural pitfalls: Watching sectors move in different directions can tempt you to chase winners and dump laggards. If sectors you skipped outperform in the short term, it’s easy to feel you’ve bet on the wrong horses and make impulsive, costly portfolio changes. Final words As we just saw, the DIY approach delivered returns broadly in line with the Nifty 500 and less than Nifty 500 Equal Weight. Which means one has to go through the trouble of hand-picking and tracking 10 sectors, only to land roughly where a single, ready-made index would have taken you with zero hassle. If the goal is solid, a broad diversified index gets you there just as efficiently, without the extra moving parts.