‘Diversify, stay invested through good times and bad’: Zerodha’s Nithin Kamath on beating market volatility

Global equities have been in a tailspin since the start of the US-Israel war with Iran, as investors have been fleeing riskier assets amid a relentless rise in crude oil prices, which has ignited fears of prolonged inflation and potentially higher interest rates, making such assets less attractive.

The sell-off is not limited to stocks alone, as other asset classes are also under pressure. Gold, which is typically considered a safe haven during times of economic uncertainty and geopolitical tensions, is also struggling to gain momentum, while bond yields are moving higher as concerns mount that central banks may tighten monetary policy if energy prices remain elevated.

At a time of such uncertainty, investors are often confused about where to park their investments. Zerodha founder and CEO Nithin Kamath said that investors should continue diversifying their assets even as market volatility persists.

In a post on social media platform X on 30 March, Kamath said, “No one can predict which asset class will do well. For 99% of people, the best thing to do is diversify and stay invested during the good times and the bad."

He also shared an image, which shows how different diversification strategies have yielded varying results over a two-year time frame.

If an investor had invested ₹10,000 every month through an SIP and diversified the funds equally across equity, debt, and gold, they would have generated a return of 18.1% over the last two years. In comparison, if the same investment had been allocated as 60% equity, 20% debt, and 20% gold, the returns would have been around 8%.

Even a pure debt investment would have delivered positive returns of 5.3%.

On the flip side, a traditional allocation of 60% equity and 40% debt would have resulted in a loss of 2.5%. Meanwhile, investors who remained fully invested in equity indices such as the Nifty Large Midcap 250 and the Nifty 500 would have faced even steeper losses of 7.8% and 9.1%, respectively.

Simple allocation rules that stand the test of time

Against this backdrop of heightened volatility and uncertain returns across asset classes, market veterans have consistently advocated a disciplined and diversified approach to investing rather than chasing short-term trends.

Berkshire Hathaway Chairman Warren Buffett — widely known as the “Oracle of Omaha” — has long been a proponent of keeping investing simple. For retail investors who may lack deep market expertise, Buffett recommends the 90/10 rule.

According to him, investors should allocate 90% of their funds to low-cost index funds such as the S&P 500 (in India, equivalents include the Nifty 50, Nifty 500, or BSE 500), and the remaining 10% to short-term government bonds or securities (G-secs).

The veteran investor believes this strategy provides broad market exposure while offering a cushion against severe market downturns. In his view, diversification and simplicity work far better for most investors than attempting to time the market or concentrating investments in a few bets.

Echoing a similar philosophy, Edelweiss Mutual Fund CEO Radhika Gupta has also emphasised the importance of steady, diversified investing. She has often noted that nearly 80% of her portfolio is allocated to what she calls “dal-chawal funds” — simple, non-glamorous investments such as hybrid funds and diversified equity funds.

All-weather strategy: Building resilience across cycles

Reinforcing the case for diversification, billionaire investor Ray Dalio has advocated the concept of the All-Weather Portfolio.

In a recent post on X, Dalio described it as a passively managed mix of assets designed to deliver returns higher than low-risk instruments like cash, while carrying significantly lower risk than concentrated exposure to equities or bonds.

He clarified that the All-Weather approach is not a fixed product but a framework — a form of financial engineering that can be structured in multiple ways. The core objective is to build a portfolio that can generate returns meaningfully above cash, remain resilient across different economic environments, and avoid dependence on constant tactical decision-making.

Disclaimer: We advise investors to check with certified experts before making any investment decisions.