Planning your portfolio for 2026? Here’s how to think about gold, equity, and debt allocation

2025 has been an unusual year for financial markets. Traditionally safe assets have outperformed their riskier counterparts, reversing the typical investment narrative. Gold, often seen as a safe haven, led the pack with nearly 50% returns, while equity markets remained volatile after a three-year bull run.

Equities peaked in September 2024, then fell sharply in early 2025, recovered for a few months, corrected again during the Indo-Pak skirmish, and have seen modest gains over the last six months. On a one-year basis, the Sensex has delivered just 7% returns.

Against this backdrop, investors face an important decision on how to adjust their asset allocation in the short term.


I have always believed that in your wealth journey, the most important decision is asset allocation. Short-term adjustments may give a sense of elation if they perform well, but long-term allocation determines sustained wealth creation. A portfolio underweight in equity may feel comfortable after a single year’s returns, but it is likely to underperform over the long term. Take a moment to review your allocation across equities, real estate, fixed income, and gold. Are you taking the right level of risk? Is your money working hard enough for you?

Since this article focuses on short-term trends, let’s shift to that. Someone once said, “In the short term, markets act like a voting machine; in the long term, a weighing machine.” One year ago, the Nifty PE hovered around 22x forward; today it is around 20x. Earnings growth over the last five quarters has been slow, but this trend may reverse. With robust economic activity and positive corporate guidance, earnings growth should revive strongly over the next two years. Coupled with continued strong inflows into equities, this suggests that a higher allocation to equity in your portfolio is justified.

Gold, on the other hand, has seen one of its strongest rallies in history. Central bank buying, trade conflicts with the US, and diversification of forex reserves have driven demand. For example, the RBI’s gold holdings have risen from 7% to nearly 15% of its USD 700 billion reserves in two years. But gold is volatile, unlike sovereign bonds. Central banks may pause or slow purchases, and speculative demand is often driven by recent price trends. Consequently, gold may offer only moderate returns going forward, and a significant correction in the coming years is possible. It should therefore constitute a smaller portion of your portfolio.

Fixed income returns have moderated following a 1% rate cut by the RBI, with expectations of further cuts. Safe instruments, like FDs, PPF, and high-quality bonds remain important for wealth preservation and portfolio balance, depending on your risk tolerance. Avoid high-yielding products marketed online, as safety should be the primary objective in fixed income.

Conclusion: To benefit from short-term trends, consider increasing allocation to equities via mutual funds or PMS, reducing your allocation to gold, and continuing to hold a healthy portion in safe fixed-income instruments.

(Raghvendra Nath is Managing Director of Ladderup Asset Managers)