Year-end portfolio review: Should you reduce weight of gold and silver?

If allocations to these precious metals go beyond set bands, small deviations may be corrected by directing more money into underperforming asset classes like equities and debt

The end of the year is probably the best time to undertake a comprehensive review of your portfolio. It helps identify imbalances that may have emerged during the year and provides an opportunity to make timely corrections. In turn, this ensures that your portfolio is more resilient and better positioned to navigate the challenges of the year ahead.

 

Why should you conduct a review

 

A year-end review helps investors check how each asset class performed and whether their portfolio captured those returns. “A review also allows investors to rebalance their portfolios in case any part of it has grown disproportionately or lagged, thereby altering the overall risk profile of the portfolio,” says Niranjan Avasthi, senior vice president, Edelweiss Mutual Fund.

 

Investors should also use this as an occasion to realign their portfolios to altered market conditions and personal goals.

 

Precious metals outperformed this year

 

In 2025, precious metals, especially gold and silver, performed strongly. “This was driven by global economic uncertainty along with a weaker US dollar, which increased demand for safe haven assets. Silver gained additionally due to strong industrial demand and supply-related constraints,” says Avasthi.

 

Within equities, international markets like the United States (US) and China performed well.

 

After five consecutive years of underperformance vis-à-vis mid-cap and small-cap funds, large-cap funds outperformed as elevated valuations in mid-caps and small-caps offered limited room for further gains. As markets turned volatile, investors preferred stable businesses.

 

In debt funds, duration-led gains were limited. Low duration, short duration, and banking and PSU (public sector undertaking) funds delivered reasonable returns, benefiting largely from accrual gains.

 

Rebalance your portfolio

 

Ideally, financial goals should be reviewed annually while portfolio checks should be done quarterly or half-yearly. Rebalancing can be undertaken when allocations deviate beyond pre-set drift thresholds.

 

Archit Doshi, senior vice president (AMC), PL (Prabhudas Lilladher) Capital, suggests using a two-tier threshold. “For material buckets (e.g., equity vs debt) use relative drift limits of 15–20 per cent of the target allocation. So a 50 per cent equity target means about 7.5–10 percentage-point band. For smaller sub-buckets apply absolute bands of 3–5 percentage points,” he says.

 

Small drifts should be corrected via new contributions or by adjusting systematic investment plans (SIPs). “This helps to avoid both tax and exit loads,” says Ankur Punj, managing director and business head, Equirus Wealth.

 

Larger drifts should be corrected with measured sells after factoring in exit loads, capital gains—long term or short term—implications and transaction costs. “When selling is necessary, prioritise units that have completed exit-load periods, and are already long-term, so that you benefit from lower LTCG rates and the annual exemption (Rs 1.25 lakh) allowed on sale of equities,” says Punj.

 

“The exit load structure, which can be tiered, needs to be understood,” says Vishal Dhawan, founder and chief executive officer, Plan Ahead Wealth Advisors.

 

Factor in changes in personal circumstances

 

Besides market conditions, personal circumstances also evolve. During the year-end review, you must assess whether changes in your circumstances call for adjustments in the portfolio.

 

Change in income level: A change in income mainly affects how much an investor can invest. “When income increases, an investor’s cash flow grows, allowing them to increase their SIP contributions or invest larger lump sums,” says Feroze Azeez, joint chief executive officer, Anand Rathi Wealth.

 

Intuitively, higher income should lead to higher risk appetite. “But we suggest that investors go through a risk profiling process before changing their asset allocation,” says Abhishek Kumar, Securities and Exchange Board of India (Sebi)-registered investment adviser and founder, SahajMoney.com.

 

When income reduces, contributions may need to decrease to maintain adequate liquidity and a healthy emergency fund. “When income declines, or uncertainty arises, it’s important to allocate more to liquid, low-risk assets and strengthen your emergency fund to manage potential job loss or income disruption,” says Kumar.

 

Response to volatility: Since 2012, the Nifty 50 index has delivered returns above 7 per cent in over 92 per cent of five-year periods and nearly 100 per cent in 10-year periods. “This reliability is similar to that of debt, suggesting that short-term volatility shouldn’t affect long-term investment decisions,” says Azeez.

 

Volatility is a normal part of market cycles, not a signal to change strategy. “If an investor is likely to lose sleep or feel pressured to sell during market declines, they may require a more conservative allocation, even with a long-time horizon,” says Kumar. He points out that one should always align their portfolio’s risk level with their genuine comfort zone so they can stay invested through all market conditions, rather than abandoning their investment strategy at the worst time.

 

Age: Age shapes how much risk an investor can take, but the key is time available. “Younger and middle-aged investors with long-term goals, like retirement in 15 to 20 years, can maintain an 80:20 equity to debt mix. This longer time horizon allows them to leverage equity’s compounding benefits and lower volatility over time,” says Azeez.

 

As investors move into their late 40s and 50s, financial responsibilities increase and time horizons shorten. “This is when allocations should gradually shift toward a more balanced mix to protect the wealth already created while still allowing for moderate growth,” says Azeez.

 

According to Kumar, one’s risk appetite plays a vital role in asset allocation: younger investors may be very risk-averse due to past experiences, while older investors may be more aggressive. “The conventional ‘100 minus your age’ rule should not be used as an asset allocation strategy,” says Kumar.

 

Goal approaching: According to Azeez, investors should begin reducing equity exposure 1 to 1.5 years before any major goal. “This secures accumulated gains from short-term market corrections before funds are needed, allowing investors to plan and optimise tax implications rather than making rushed exit decisions,” says Azeez.

 

Life events: Life events such as marriage, childbirth, a job transition, a medical emergency or new financial goals should prompt a fresh look at the portfolio. “Major life events, starting with marriage, would require fair discussion about finances and aligning goals between partners. Additionally, childbirth would bring dependency along with long-term education expenses,” says Kumar.

 

(The writer is a Mumbai-based independent journalist)

 

When should you exit a fund?

 

Persistent underperformance — such as being in the bottom quartile repeatedly or failing to beat the benchmark for years — is a signal to reassess or exit a fund

A fund should go on the watchlist if it stays in the worst quartile for three consecutive quarters

Determine whether underperformance is due to temporary style effects or deeper structural issues; exit if peers with similar styles are doing much better

Fund manager or team changes warrant monitoring, as new leadership may alter strategy or fail to replicate past results; evaluate performance over two to three quarters

Watch for strategy drift or changes in a fund’s character that no longer match your original investment purpose