Investment Lessons We (Re)Learnt in 2025

In a sarcasm-laden comic strip by Scott Adams, Dogbert claims he can become a stock market expert by buying stocks, and then recommending them on TV. When Dilbert questions him about ‘fundamentals’, he retorts “It Doesn’t Get More Fundamental Than That”.

Several investors may believe that Dogbert was running equity markets in 2025. Truth be told, it wasn’t as bad a year, as it is being made out to be. What sets 2025 apart from the past few years is that volatility re-surfaced, and making money wasn’t as easy. Investors were reminded of some age-old investment lessons.

Here are five lessons, we relearnt in 2025:

1.     Expect the Unexpected

The year began with Indian equity markets experiencing volatility, thanks to stretched valuations. In April 2025, US President Trump imposed trade tariffs on several countries including India, leading to a sharp fall. Roughly a week later, Trump paused tariffs, and markets recovered.

When AI emerged as the buzzword, Indian equities were found wanting. As the year progressed, foreign portfolio investors busily sold Indian stocks. India emerged as the worst performing emerging market; the Indian rupee depreciated sharply versus the US dollar, further reducing market’s allure for global investors.

Some investors may believe they got the short end of the stick. But, that’s the nature of the beast. Investors must be willing to ‘expect the unexpected’ and have a stomach for volatility.

2.      Positive Macros May Not Move Markets

It’s not like only negative events played out in 2025. The macroeconomic environment had several positives to offer. The Union Budget raised tax-free income for citizens, GST rates were rationalised. The economy grew at a rapid pace (8.2%) in the second quarter of the financial year.

Inflation was benign for a better part of 2025. The central bank did its bit by slashing policy rates multiple times. To be fair, enough measures were put in place to boost economic growth, which in turn, should have played out positively for equity markets.

However, in the near-term, it isn’t uncommon for equity markets to stay immune to a positive economic environment. Hence being patient is crucial. At the risk of leaning on a cliché—time in the market, matters more than timing the market.

3.     Don’t Chase Returns

Small-cap stocks (and funds) delivered a strong showing in 2023 and 2024. However, 2025 was a different story. On a year-to-date basis, the typical Small-Cap fund has posted a loss of over 4%, and the Small Cap Index has shed over 5%. That should not have come as surprise, though.

It was no secret that valuations in the small-cap segment, had run ahead of valuations, making them expensively priced. Investors were driven by recent performance, and kept investing more, hoping for an encore.

Chasing performance is rarely a smart move. Rather, investors would do well to consider investment merit before making investment decisions.

4.     Diversification is the Key

In 2025, gold shone, and silver glittered even more. So far in 2025, the average Gold ETF has clocked a growth of 75%; the average Silver ETF has appreciated by roughly 136%. That’s a robust showing, considering that the Sensex is up by roughly 10%.

Unsurprisingly, as the year progressed, Gold and Silver ETFs (and funds), attracted substantial inflows. Diversification is one of the basic tenets of investing. It shouldn’t take a bull-run to convince investors of the merit of investing across assets classes. Investors should have had an allocation to commodities to begin with, in line with their risk-appetite and investment objectives.

Different asset classes will deliver at different points in time. The key is to always hold a diversified and well-rounded portfolio.

5.     Beware of Fund Companies’ Marketing Spiel

Fund companies will act in their interest, even if investor interest is compromised with. From Dec 2024 through Nov 2025, 33 Sectoral/Thematic funds were launched by fund companies. The category’s asset size rose by a whooping INR 655 bn, second only to Flexi Cap funds.

Truth be told, there is rarely a compelling reason for investing in a Sector/Thematic fund. The dominance of Sector/Thematic funds bears testimony to what aggressive marketing campaigns and an ‘incentivised’ ecosystem, can accomplish. Investors have been convinced of the merits of an untested fund from a category, that is largely suited for informed investors.

Investors must ignore the marketing spiel, and focus on funds (read: diversified) that will serve their interests. 

All the lessons listed above are time-tested. But markets have a way of reminding us, and ensuring that we relearn them, time and again.

What does 2026 have in store for us? I wish I knew!

As investors, what we can do is—be disciplined, adhere to the lessons learnt, and be a bit optimistic. Hopefully, a brighter future awaits.

Happy Investing!

#2025, #investing, #lessons, #markets, #mutualfunds

Of Lenskart, Mutual Funds, and Investing

Social media has emerged as an undeniable barometer of what’s occupying investor mindspace. Even a cursory participant like me, knows that Lenskart’s Initial Public Offering (IPO) is on everyone’s mind.

A tech-driven new age company, Lenskart is an eyewear retailer. It isn’t uncommon for IPOs of new age companies to be questioned for the robustness of their business models, ability to generate profits, and rationality of valuations. To that end, Lenskart is no different.

Perhaps, what caught everyone’s eye was the magnitude of lofty valuations; also, some comments made by the founder/CEO didn’t sit well with the investor community.

Unsurprisingly, there’s been a barrage of criticism on social media. I have never seen so many memes targeting an IPO 😊

Several leading Indian fund companies have invested in the IPO. Expectedly, they have also taken stick for their decision. Fund companies will have to justify to investors, what drove them to invest in the IPO.

This is where it gets interesting: Some have used the Lenskart IPO to slam the utility of mutual funds as investment vehicles. It has been insinuated that mutual funds are tools for compromising interests of retail investors.

The message is clear: Be way of mutual funds!

To my mind, that line of thought is both fallacious and uniformed.

Mutual funds enable retail investors to access markets, using the portfolio manager’s expertise. Indeed, the onus of selecting an apt fund lies on investors. Beyond that, the portfolio manager and his investment team are ‘first among equals’, while making investment decisions.

Not every stock in the fund portfolio will deliver, or even be apt for every investor in the fund. However, so long as the portfolio helps investors achieve their financial goals (while adhering to their risk profile), it is fine.

Furthermore, when investments fail, it shows in fund performance, opening it to investor scrutiny. Any investor who loses conviction in the portfolio manager and his process, has every right to liquidate his holding and invest elsewhere.

Don’t get me wrong: Indeed, fund companies must be held to the highest standards of probity. Also, Indian fund companies haven’t exactly covered themselves in glory when it comes to acting in investor interest.

Heck, I don’t think anyone has been more critical of the Indian mutual fund ecosystem than me.

However, running down and questioning the very utility of mutual funds as investment avenues because some fund companies invested in a questionable IPO is excessive.

#Lenskart, #IPO, #mutualfunds, #investing

Gold: To Be or Not To Be

For many Indians, this year's Diwali festivities ended a bit abruptly.

Just as they were celebrating their favourite asset class--Gold’s record-breaking performance, out of the blue, gold prices fell sharply.

Indians’ affinity for gold is no secret, thanks to both cultural and religious reasons. Globally, we rank among the largest consumers of gold. To the delight of many, gold has had a dream run over the last year or so. 

The average Gold ETF appreciated by roughly 48% over 1-Yr, versus a 6% gain posted by the typical Large-Cap Fund. As if on cue, gold prices peaked around Diwali, and then came a downturn.

Expert Speak

As gold prices surged over the last year, experts stated that everything from geopolitical tensions, economic uncertainty, inflationary fears, to central bank actions were responsible. And perhaps they indeed were.

Interestingly, not much has changed on ground. Yet gold prices have nose-dived from their peak, and how.

Then again, a year ago, none of the experts decisively predicted that gold would be on a tear, and equities would struggle. Likewise, no one saw the recent downturn either.

Perhaps it isn’t possible to foresee such events, despite what much-vaunted experts would like us to believe. Therein lies a lesson for investors who have a penchant for seeking out 'guru wisdom'.

Basics Are Forever

For retail investors who are trying to figure out 'what's next' on the gold front, the answer (as is often the case), could well lie in the basics of investing.

🟦 To begin with, it makes sense to invest in gold from a diversification perspective. Hence, alongside, asset classes such as equities and fixed income, gold should also find place in your portfolio.

🟦 Next, decide on how much you should allocate to gold. Broadly speaking 5%-10% is deemed a reasonable range. But, investing is a personalised activity. Hence, determine an apt allocation based on your existing portfolio and investment goals.

🟦 Finally, it is likely that recent price changes have resulted in gold occupying a different weight, versus what you have determined as the ideal allocation.

If that is the case, tweak your gold investments to revert to the desired allocation.

Some may point that that this approach is a bit simplistic and basic. Indeed, it is! While investing, keeping things simple, is the key!

Unless you fancy yourself as a commodity trader or guru, you have no business trying to predict the next peak or trough. As an investor, you should be focused on meeting your investment goals rather than predicting the future.

Resist the urge to act on every exciting headline in business dailies and television channels, it will serve you well over the long-haul.

#Gold, #AssetAllocation, #Investing, #Experts

What Explains SEBI’s Newfound Affinity for NFOs?

Back in 2017, market regulator SEBI decided to define and create mutual fund categories. One of its objectives was to rationalize the number of funds on offer. As a result, it applied a ‘one fund per category’ rule, with some exceptions.

Last week, SEBI released a consultation paper on the same topic (categorization and rationalization of mutual funds). Therein SEBI has proposed several changes, and invited public comments.

Oddly enough, the overarching theme seems to be—launch more funds (read new fund offers—NFOs). Perhaps in SEBI’s books, that is the way forward for the industry.

For instance, one of the proposals is to permit launching a second fund in each of the defined categories, subject to certain conditions being fulfilled. Critics will point out that an asset size of INR 500 bn for the existing fund (one of the conditions) is a big hurdle. It isn’t. Several funds have already breached that threshold, and given the popularity of mutual funds, more will, sooner than later.

Then there are other proposals: Allow fund companies to launch both Contra and Value funds, instead of either one at present. There is a proposal to allow launch of Sectoral Debt Funds. Introducing more Hybrid Funds (Solution Oriented) and Life Cycle Fund of Funds, also find mention.

I have been a vocal critic of fund companies for recklessly launching funds with the sole intent of shoring up assets. Nonetheless, even back in 2017, I had opined that SEBI’s ‘one fund per category’ rule lacked nuance and, in some cases, could result in the baby being thrown out with the bath water.

Perhaps back then, SEBI believed that its ruling was the best way to rein in fund companies. And to its credit, so far, SEBI has stuck to its guns.

That said, I have no idea what’s driving SEBI’s volte-face.

Did fund companies prevail upon it, or, does it truly believe that limiting number of funds, was a flawed move to begin with?

Fund companies have repeatedly demonstrated a herd mentality-like approach. For instance, in categories such as Flexi Cap and Large & Mid Cap, despite the leeway to exploit the market cap spectrum, the average portfolio is consistently dominated by large-caps.

It’s unlikely that more funds will enhance the quality of choices available to investors. But fund companies will gain thanks to more assets.

Will SEBI’s proposals be implemented in toto? Let’s wait and watch.

#SEBI, #mutualfunds, #categories, #NFOs, #investing

Of Conflicts, Trump, and Indian Corporates

Before he became the President, Donald Trump was a successful entrepreneur in the US. However, the traits he displayed during the recent India-Pakistan conflict were an eye-opener. It is evident to me that Trump would have flourished in the Indian corporate set-up as well.

Here’s a tongue (firmly) in cheek take:

☑️ Being Mr. Flip-Flop

In several Indian corporates, the ability to swiftly change one’s stated position, and be flexible with principles is seen as virtue. Trump excels on this count.

Veep Vance unambiguously stated that India-Pak conflict is “none of our business”, and rightly so. Four days later, Trump made his deputy look silly, by claiming that he was responsible for enforcing a ceasefire between the two nations. Such suppleness with beliefs can go a long way in Indian corporates.

☑️ Being Mr. Glib-Tongued

Corporate honchos are known to convincingly preach on subjects wherein they have little to no understanding, thanks to their glib tongues. It’s a quality that has held many in good stead. Trump holds this quality in spades.

When the conflict broke out, Trump claimed that the two countries have been fighting “for centuries”. Subsequently, he claimed that the fighting has been on “for a thousand years”.

Even the average fifth-grader is better informed than Trump. Aided by a smooth tongue, Trump dispensed with the need to be factually correct.

☑️ Being Mr. Credit Grabber

Workplaces are infested with credit grabbers. Managers routinely claim credit for their subordinates’ accomplishments. Trump knows a thing or two about credit grabbing.

By now, it is well-documented that India’s retaliation led to the Pak DGMO requesting his Indian counterpart for a ceasefire. Back-channel negotiations ensued. However, it was Trump who swooped down to grab credit for the ceasefire.

☑️ Being Mr. Double Standards

The ‘success is mine, failure is yours’ style of functioning is popular in the corporate world. Those who are quick to claim credit for any success, are even speedier when it comes to shirking responsibility for their failures. It’s no different with Trump.

The ceasefire that he claimed credit for, was breached by Pakistan a few hours later. But that never elicited a response from Trump. Perhaps the failure was someone else’s doing.

☑️ Being Mr. Pokey Nose

Sadly, power play is deeply entrenched in workplaces. Some see it as a means to survive and grow. Poking one’s nose in unrelated matters is a common form of exerting power.

For instance, a CFO who believes in directing the tech team on its work. Yet again, Trump makes the cut.

It’s no secret that Kashmir is the heart of India-Pak conflicts. Furthermore, India’s position on not involving third parties is unambiguous. But Trump has magnanimously declared that he will help resolve the Kashmir issue. Big words from a man struggling with historic low approval ratings in his country.

#corporatehumour, #Trump, #IndiaPakistan, #OperationSindoor

A Five-Step Guide to Surviving the Market Crash

As I write this, Indian equity markets are down by roughly 5%. This is undeniably a testing time for equity investors. Here’s my two cents’ worth, on how to survive the market crash:

✅ Don’t Panic

When markets crash sharply, it isn’t uncommon for investors to panic. However, now is the time to stay calm, and not succumb to the frenzied environment. Acting in a panic-stricken state is akin to a surefire recipe for flawed investment decisions. Resist the temptation to sell investments; that will simply convert a notional loss, into an actual loss. Finally, steer clear of the temptation to frequently check your portfolio.

✅ Ignore the Soothsayers

Whenever markets crash, certain ‘market experts’ come crawling out of the woodwork, and make predictions. They will explain in great detail as to why markets crashed, and even predict what is next in store. Guess what, none of these soothsayers predicted the current market crash. Neither do they know what will happen next. They are seeking their 15 minutes of fame. Your interest will be best served by ignoring them.

✅ Introspection is the Key

Remind yourself that equity investing necessitates a long-term investment horizon.

Remind yourself that market crashes are par for the course in equity investing.

Remind yourself of the goals that you planned to accomplish with your equity investments, be it wealth accumulation, providing for your children’s education, or retirement. Selling investments at this stage will likely hamper those goals.

✅ Don’t Discontinue SIPs

Do not discontinue ongoing investments via the Systematic Investment Plan (SIP) route. SIPs operate on the concept of rupee-cost-averaging. A market crash like the present one is when their utility comes to the fore. An investment at this stage will fetch you more units and reduce the total investment cost. This could well be the right time to double down on your investments. Like other items, equities should also be bought when their prices are low (read crashing).

✅ Keep the Faith

A big part of successful equity investing is being optimistic—the faith that the future will be better than the present. Now would be a good time to remind yourself of the robust rally that equity markets experienced post-Covid lows. If that rally didn’t last forever, neither will the market crash.

The truth is that no one knows what’s next in store for markets. This is neither the first time that markets have crashed, nor will it be the last time. That’s just the nature of the beast. As investors, we can’t control how markets behave. Instead, we should focus on what we can control—our actions.

Let’s stay calm and resolute. This too shall pass!

Of Trump, Market Volatility, and Investor Behaviour

Back in 2007-08, I used to run a financial planning chat for one of the most popular websites in the country. Then the global financial crisis hit, and gloom set in. Investors (who were rank strangers) hurting from the market crash and bleeding portfolios, would often vent their anger at me.

A typical chat session could be amusing; investment-related queries would be interspersed with jibes and cuss words; the poor moderator had his work cut out. Bizarre as it sounds, some blamed me for the downturn, and perhaps cursing at me provided them succour.

Cut to 2025, a similar scenario is playing out. Dynamics have changed but not investor behaviour. Now, investors are split into two segments, with one trolling the other.

Back home, for a while now, economic growth had slowed down, market valuations were stretched, and earnings growth had disappointed. If Indian markets seemed ripe for a decline, developments in the US proved to be the proverbial straw that broke the camel’s back. In the US, president Trump began his second term in a bombastic manner with outrageous statements and disruptive policy decisions. Expectedly, equity markets have been engulfed in volatility leading to investor discomfort.

Here's where things get truly weird: social media is full of Indian investors venting at others, for ‘supporting’ Trump. Seemingly, the perception is that those in favour of Prime Minister Modi also support Trump because of their supposed camaraderie; conversely, those against Modi were rooting for Kamala Harris. At present, the anti-Modi/anti-Trump brigade is blaming the pro-Modi/pro-Trump section for market volatility.

That rationale is so far-fetched that it’s laughable. No Indian citizen voted for Trump, neither did they have a say in his policy decisions. Then again, there are always investors who get flustered when markets crash, and feel the need to act out.

Making whacky statements on social media is relatively harmless, but letting those emotions drive investment decisions can have serious consequences.

Investors must understand that risks are inherent to equity investing. This is especially noteworthy for those who have witnessed a nearly secular upturn, post Covid lows. Market volatility is par for the course, while investing in equities. Even robust investments will bleed when markets experience a sharp downturn. That’s the nature of the beast.

Investors who don’t have a stomach for volatility need to re-asses their equity investments. Those who are up for the ride, with all its highs and lows, must ‘learn to be still’ in volatile phases. Like it or not, emotions can be one's worst enemy while investing.

On a lighter note, if trolling others could solve one’s woes, then several active social media users would have been the happiest and wealthiest individuals on earth 😀