Counting holdings tells you almost nothing
"I hold eighteen stocks" sounds diversified and can easily describe a portfolio that is effectively three stocks plus fifteen rounding errors. If one position is 45% of the book, six are 8% each and eleven are under 1%, the month-to-month result is the story of the first position and nothing else. The eleven small ones do not reduce risk; they only reduce the amount of attention each holding gets.
Concentration has to be measured on weights, not on a count. This checker computes the three measures that matter — the largest weight, the combined top-three weight, and the Herfindahl-Hirschman Index — and then converts the HHI into the number that is easiest to act on: the effective number of holdings.
How to use this checker
- Add a row per holding with its current market valueStocks, funds, ETFs — anything you hold. Include index funds as single holdings; the checker will show why that matters below.
- Read the four headline numbersLargest weight, top-three weight, HHI, and effective holdings. The last one is usually the most revealing.
- Compare the effective count against your actual countA large gap between them is the size of your sizing problem: you are carrying the administrative cost of many positions without the diversification benefit.
The three measures, and what each one adds
Largest weight and top-three weight
The blunt instruments, and useful precisely because they are blunt. If your top three are more than about 40% of the portfolio, the portfolio's outcome is decided by three companies. That may be exactly what you intend — a conviction portfolio is a legitimate strategy — but it should be a decision, not something you discover after a bad quarter. A single holding above 10% deserves a specific current reason, not just the fact that it has run up.
HHI
The Herfindahl-Hirschman Index is the sum of every holding's squared weight. Squaring is the trick: it makes large positions dominate the measure and makes tiny ones nearly invisible, which is exactly how concentration risk actually behaves. It runs from a low value for many equal holdings up to 1 for everything in one position. On its own the number is hard to interpret, which is what the next measure fixes.
Effective number of holdings
One divided by HHI. This converts the index into a directly comparable count: the number of equally weighted positions that would give the same concentration as your actual portfolio. It is the single most useful line on this page, because it is immediately comparable to the number of rows you entered.
| Portfolio | Actual holdings | HHI | Effective holdings |
|---|---|---|---|
| Ten equal positions of 10% each | 10 | 0.1000 | 10.00 |
| One 50% position and two of 25% | 3 | 0.3750 | 2.67 |
| One 55% position and nine of 5% | 10 | 0.3250 | 3.08 |
| Four equal positions of 25% | 4 | 0.2500 | 4.00 |
The third row is the one worth staring at. Ten holdings, and it behaves like three. Every figure in that table is just the sum of squared weights and its reciprocal, so you can verify any row by hand.
Concentration measured on your live holdings
AIVITTA reads your actual broker portfolio and reports concentration, sector overlap, correlation and risk contribution automatically — no manual entry.
What this checker deliberately does not measure
Weight-based concentration is necessary and not sufficient. Ten equally weighted holdings look perfectly diversified to every number on this page and can still be one bet:
- Sector overlap. Four private banks and two NBFCs at 8% each is a 48% bet on Indian financials, and this tool will report it as well diversified.
- Correlation. Holdings that move together in a normal market move together far more tightly in a fall. Diversification tends to disappear exactly when it is needed.
- Look-through overlap. A Nifty 50 index fund plus direct positions in its largest constituents double-counts those companies. The checker sees two holdings; your economic exposure is one, larger.
- Factor exposure. A portfolio of ten different small-cap momentum names is diversified by ticker and concentrated in a single factor.
- Non-equity risk. Currency, interest-rate sensitivity and liquidity are outside the scope of a weights calculation entirely.
So read this as the first screen, not the last word. Diversification for Indian investors covers sector and factor overlap, and understanding portfolio risk covers correlation and beta.
Reasonable thresholds
There is no regulatory or academic line, but a workable set of defaults for a self-managed Indian equity portfolio: no single direct holding above roughly 10% unless you can state the reason today, top three under about 40%, and an effective holding count of at least 8 to 12 if diversification is the goal. Index funds and diversified mutual funds are reasonably treated as many holdings rather than one when you think about it, even though this tool counts them as single rows.
If your numbers are far outside those ranges, the fix is usually adding to the underweight positions rather than selling the large one — trimming a winner has a tax consequence and a behavioural one, while directing new money to the smaller holdings gets you to the same place without either. How to analyze a stock portfolio covers the full review, and portfolio rebalancing in India covers doing it without unnecessary tax leakage.