There is an important difference between owning a diversified portfolio and actually having a diversified portfolio.
You can own 20 different stocks, several ETFs, mutual funds, and other investments and still have most of your portfolio exposed to the same underlying risk.
That risk is often the direction of the public equity markets.
Today, there is another reason to pay attention to this.
According to FINRA data, margin debt reached approximately $1.5 trillion in June 2026, a record level and roughly 50% higher than a year earlier. Investor credit balances were also deeply negative at approximately $1.06 trillion.
Margin debt is money investors have borrowed from their brokers to purchase securities.
Leverage can increase gains when markets rise, but it can also amplify losses when markets fall. Investors using borrowed money can face margin calls and may be forced to sell positions during periods of stress.
This does not mean a market decline is imminent.
It does mean the level of leverage in the market is worth understanding.
The Question Most Investors Should Be Asking
The question isn’t simply:
“How many investments do I own?”
A better question is:
“What is actually driving the returns of the investments I own?”
Consider an investor who owns an S&P 500 fund, a technology ETF, several individual technology stocks, and a growth-oriented mutual fund.
On a statement, that may look diversified.
But during a significant equity market decline, many of those investments may move in the same direction.
Different securities do not necessarily mean different risks.
True diversification comes from having exposure to different return drivers.
Why This Matters for Income Investors
This becomes particularly important as investors approach retirement.
During the accumulation years, investors generally have more flexibility to wait through market cycles.
Retirement can change that equation.
If an investor needs to withdraw money from a portfolio during a significant market decline, selling depressed assets can have a much greater impact than simply watching an account balance fluctuate.
This is one reason income and capital preservation become increasingly important considerations.
Instead of asking only how much a portfolio might grow, investors may also want to ask:
Where will my income come from?
And:
Will every part of my portfolio be dependent on the same market conditions to produce that income?
The Value of Different Return Drivers
The goal isn’t to find an investment that never moves when stocks move.
That is unrealistic.
The goal is to introduce assets where the return is influenced by factors that are meaningfully different from those driving the rest of the portfolio.
Private debt is one example.
With a debt investment, returns are generally tied to factors such as the borrower, loan terms, interest payments, collateral, underwriting, and repayment of principal.
That is different from owning an equity investment where the market price can change based on earnings expectations, interest rates, economic conditions, investor sentiment, and other factors.
This Is Not About Predicting a Crash
It is tempting to look at elevated leverage and immediately conclude that a market crash is coming.
That is not what the data tells us.
High leverage can exist for extended periods while markets continue to rise.
The more useful takeaway is simply that investors should understand how much leverage and concentration exists within their portfolios.
If the majority of your investments depend on public equity markets continuing to rise, you have a particular type of portfolio risk.
Adding investments with different underlying return drivers may help create a portfolio that is less dependent on any single market environment.
The Bigger Portfolio Question
Private credit does not eliminate risk.
It introduces a different set of risks, including borrower default, underwriting risk, liquidity limitations, and potential loss of principal.
But that is precisely the point of diversification.
The objective isn’t to eliminate risk. It is to avoid having all of your risk come from the same place.
For income-focused investors, that distinction can be especially relevant.
A portfolio may not need more investments.
It may need more different sources of return.
At Eppler Capital Funds, private credit is one way we provide accredited investors with exposure to income-producing assets that have different return drivers from traditional public markets.
But the larger portfolio question comes first:
If one market stopped working in your favor, where would the rest of your portfolio’s returns come from?
That is a question worth asking regardless of what the market does next.