Biggest investing surprises of 2025 & how to avoid shocks in 2026

Gold's surge, small-cap swings, flat debt returns and crypto whiplash tested retail discipline

As 2025 draws to a close, investors are looking back at a year that defied forecasts across asset classes. Expectations at the start of the year centred on cooling inflation, a gradual interest-rate pivot and steady equity returns.  Below is a breakdown of the biggest surprises of 2025 and tips investors can carry into 2026.

 

Gold’s unexpected strength

Gold was one of the standout shocks of 2025. Despite stable interest rates, the metal rallied 53 per cent year-to-date and touched ~1,32,294 per 10g. According to Shweta Rajani, head of mutual funds at Anand Rathi Wealth Ltd, many investors “began chasing performance”, with gold ETF inflows jumping 578 per cent year-on-year.

 

Rajani shared a case where an investor pushed gold exposure to 38 per cent. When gold corrected 9.6 per cent in October, the heavy allocation dragged the entire portfolio lower. “The core mistake was treating gold as an equity replacement,” she said, adding that gold works best as a defensive allocation capped near 20 per cent.

 

Midcap and smallcap volatility

Midcaps and smallcaps saw sharp swings, including a 17-23 per cent correction in April.

 

Rajani said many investors misread these normal cycles and allowed portfolios to become “allocation-heavy”, with 50-60 per cent in mid and small caps. 

She cited the case of a 34-year-old investor who suffered a 16 per cent portfolio drawdown due to 65 per cent exposure in these categories. Aligning his allocation to 55:23:22 across large, mid and small caps reduced risk and restored balance.

 

Interest-rate bets that failed

Many investors positioned for early rate cuts by shifting money into long-duration debt funds. “These tactical calls delivered flat outcomes,” Rajani said.

 

One client who moved heavily into long duration saw stability deteriorate.

 

Rajani reallocated him to equities and tax-efficient arbitrage funds, reiterating that debt should “support liquidity and safety, not be used for timing interest cycles”.

 

Crypto’s sentiment whiplash

 

Crypto delivered abrupt spikes and deep corrections, with Bitcoin falling nearly 25 per cent from its highs. Rajani highlighted

 

a young investor who let crypto drift to 30 per cent of his portfolio. After the correction erased gains, she moved him back to diversified equity funds. “Long-term compounding comes from disciplined equity investing,” she said.

 

How to avoid shocks in 2026?

Rajani said the year showed how sentiment-driven rallies can reverse quickly, as seen in the defence sector, which rose 37 per cent in H1 but slipped 13 per cent in H2.

 

Her 2026 playbook includes:

 

• Build a strategy-based portfolio across equity and debt. 
• Within equity, diversify across styles and market caps using the 55:23:22 framework. 
• Review and rebalance periodically to prevent drift from goals and risk tolerance.

 

These tools can help households stay prepared for another year where markets may not behave as expected.