Mrin Agarwal financial educator, founder director of Finsafe India Pvt Ltd & co-founder of Womantra
Credit: Special Arrangement
The first three months of 2025 have not been good for most people as far as their investments are concerned. Markets have been battered by the tariff tantrums, weak corporate performance and ongoing geopolitical issues, all which have had a widespread impact on stocks.
With a tumultuous first quarter behind us and the new financial year starting, the two important areas for every individual should be to focus on are sticking to asset allocation and declaring taxes
correctly.
With midcaps and smallcaps down by 15%, many investors are unsure about continuing systematic investment plans (SIPs). Added to that, gold and silver prices have been continuously shooting up (gold has returned 48% in the last 6 months) and the interest in investing in these commodities has gone up. With gold being seen as a safe haven, while there is no end in sight for global woes and 10-year returns on gold beating equities, investors are weighing the option of moving equity assets to gold.
Before increasing the gold allocation, one should note that, while on a point-to-point basis, gold is showing better returns as compared to equities, on a long-term rolling return basis (rolling returns are average annualised returns, which remove the point-to-point bias), equities have outperformed gold by 3-4% per annum. Further, gold has only outperformed equities 35% of the time.
Clearly, gold prospers in uncertain times, while stocks flourish during periods of economic expansion. Both asset classes have their peak moments and the key is to maintain a diversified portfolio as each asset class thrives in different conditions. Thus, investors must not look at moving assets to gold only based on recent performance. Sticking to the asset allocation is even more crucial now.
However, investors can reassess investments made and the actual risk tolerance. In surging markets, it is easy to take on risk and it is only during the volatile times, that investors actually get to know if they can actually take the risk. Making corrections in line with risk taking ability and goals can help set the asset allocation right.
The start of the financial year is a good time to get all documents and statements in order for tax filing. With taxpayers receiving a large number of notices for incorrect claims on HRA, declarations on foreign stocks and not deducting TDS on rent paid etc., it is important to ensure correct declarations to avoid issues in the future.
Often, individuals are not aware of the rules and do not bother to familiarise themselves with the same. Taking professional advice from a chartered accountant is recommended, especially for those having capital gains, foreign stocks and income from house property.
Finally, staying calm and strong willed is going to be much needed to get
through 2025!