Diversify across assets, rebalance portfolio to manage risk effectively

The Securities and Exchange Board of India’s (Sebi’s) 2025 investment survey highlights a clear trend — Indian households remain deeply risk-averse.

- KARTHIK JEROME

The survey, which covered 90,000 households across 400 cities and 1,000 villages, found that nearly 80 percent of families prioritised capital preservation over pursuing higher, riskier returns.

Why investors avoid risk

Indians have traditionally been cautious investors. “People emulate what they have seen their parents do,” says Arnav Pandya, founder, Moneyeduschool.

Risk aversion is rooted in human psychology. “The pain experienced on losing a certain amount is three times the pleasure derived on gaining a similar amount,’ says Vishal Dhawan, founder and chief executive officer, Plan Ahead Wealth Advisors.

Income uncertainty contributes to conservatism. “The burden of paying EMIs on unsecured loans has made investors more cautious,” says Dhawan. He adds that the flat performance of equities over the past year has reinforced such behaviour.

Risk aversion impacts wealth creation

A focus on capital preservation limits wealth creation. “Avoiding risky assets leads to lower portfolio return over the long term,” says Deepesh Raghaw, a Sebi-registered investment adviser.

Young investors lose the benefit of compounding by avoiding equities. Inadequate exposure to equities leads to poor outcomes in long-term portfolios meant for goals like retirement and children’s education.