A 41-year-old client wants to move Rs 20 lakh of his Rs 60 lakh portfolio into a technology sector fund that returned 45% last year. What do you recommend, and what are the risks and benefits of that recommendation?

Recommend a smaller, staged position: about Rs 6 lakh, 10% of the portfolio, moved in over six months, not Rs 20 lakh this week. His request takes technology from 12% to 41% of his money, so a 50% sector fall would cost him about 21% of everything. The satellite keeps his view in the portfolio at a size where being wrong costs about 10%. Its risk is regret if the sector keeps running.

A household that moves a third of its savings into one neighbour's business because it did well last year has not diversified; it has made a bet. Kabir's request is not a fund switch but a sector bet sized at a third of his savings, on top of the technology he already owns. His diversified funds already hold about 12% technology, Rs 7.2 lakh. Moving Rs 20 lakh takes his exposure to Rs 24.8 lakh, about 41% of the portfolio.

Two features of the request deserve gentle naming. The trigger is last year's 45%, and buying a sector after a strong year means buying it when it is more expensive than before, with no evidence that the next year will look the same. And the timing, all of it this week, removes any chance to average in. Neither makes the idea wrong; both make the size wrong.

Use a stress case rather than an average. Assume the sector falls 50% from its peak, a fall of the depth sector funds can suffer; check the fund's own history before quoting a figure to him. Today that fall would cost him about Rs 3.6 lakh, 6% of his money; after the switch it would cost about Rs 12.4 lakh, 21%. With his daughter's education eight years away, a one-fifth hit from a single sector is the kind of loss that changes plans, and the kind that tempts investors to sell at the bottom.

A satellite position of about Rs 6 lakh, 10% of the portfolio, moved in through a systematic transfer over six months, with a rule to trim if technology rises above 25% of his money. That takes total technology to about Rs 12.5 lakh, 21%, and the stress case costs about 10% of the portfolio. Fund the move from the diversified fund that overlaps least with the sector fund, and check the exit load and capital gains tax on the redemption first; confirm the current rates.

Say the risk of your own recommendation plainly: if technology rises another 45%, he will have made far less than his colleagues and may blame you. Answer that in advance by agreeing the rule now, and by framing the satellite as a way to hold his view at a size he can live with if it goes wrong. A recommendation that respects his conviction is more likely to be followed than a flat no.