It's year-end: Check portfolio Asset allocation & Rebalance, Scrutinize Fund Performances

As the year draws to a close, it's the perfect time for retail investors to give their investment portfolios a thorough checkup. A year-end review helps investors understand what worked, what didn't, and how to realign their investments with their financial goals.

- By: Sudipta Mitu

Outperformer asset classes

Precious metals showed the brightest in 2025. Gold and silver funds have delivered stellar gains year-to-date (YTD) - up 58.7 per cent and 71.9 per cent respectively.

What drove this surge? A few factors: robust industrial demand accompanied by supply shortages for silver. Safe-haven demand due to global economic uncertainties (trade wars to geopolitical conflicts) and central bank buying of gold boosted gold's appeal.

Equities had a moderate run. The large-cap segment of the Indian stock market outperformed mid- and small-caps this year. The BSE Sensex is up 8.9 per cent YTD. Large-cap stocks benefited from their stronger balance sheets and earnings stability — particularly in sectors like banking and financial services — which helped them weather volatility.

Debt funds provided steady but unspectacular returns. The Reserve Bank of India (RBI) cut the repo rate thrice in February, April and June. This led to mark-to-market gains in longer-duration bond funds during the first part of the year. By year end, their returns normalized as bond yields hardened a little. In the second half, returns came mostly from accrual (interest earnings). Short and medium duration debt funds gave returns of 5-7.5 per cent.

Underperformer asset classes

Mid-cap and small-cap equity funds were the notable underperformers in 2025 after an exceptional rally in 2023 and 2024. Midcap funds have given 2.5 per cent average return while smallcap funds have yielded -4.6 per cent YTD. Large-cap funds have given 8.3 per cent YTD (as on November 11).

The key reason for mid- and small-cap funds’ underperformance was valuation concerns. These segments entered the year at stretched valuations. As earnings failed to catch up with lofty stock prices, investors turned cautious and booked profits.