ET Wealth Expo: Why market veteran S Naren thinks investors are getting gold, silver and asset allocation all wrong

The hardest part of investing is often not deciding what to buy, but resisting the temptation to buy what everyone else is buying. When an asset has delivered spectacular returns, staying away from it can feel like missing out. But by the time investors rush in, much of the rally may already be behind them.

That is precisely the investment behaviour S Naren, Chief Investment Officer of ICICI Prudential Mutual Fund, cautioned against at the ET Wealth Expo in Mumbai. He has a rather unusual way of describing it. Borrowing a term from the debt market, Naren calls it 'anti-asset allocation'.

In the bond market, AAA is the highest credit rating a security can receive. But Naren uses the acronym differently to make a point about investor behaviour. He calls it 'anti-asset allocation' because investors often mistake a strong past performance for an assurance of future returns.


"Asset allocation is buying after a correction in an asset class. And buying an unpopular asset class, I would call this asset allocation," the veteran fund manager.

The distinction, according to Naren, is particularly relevant in an investment environment where investors are increasingly drawn to assets that have already generated outsized returns. The problem is that buying into a popular investment theme is easy, while putting money into an asset that has fallen out of favour requires patience.

Silver's 216% rally brought investors rushing in

Naren illustrated his argument with the extraordinary interest in gold and silver ETFs in January 2026. He pointed out that inflows into these ETFs during the month exceeded the money that came into equity mutual funds. According to him, this was unprecedented, with no similar occurrence before or since.

The reason, he suggested, was not difficult to understand. Silver had delivered a return of 216%, making it increasingly difficult for investors to resist the temptation of joining the rally.

In conversations with investors, Naren had repeatedly cautioned against treating silver as an investment that could only move higher. He compared it to a small-cap stock, pointing out that it carried similar risks. But the response he encountered was often different. Investors argued that silver had applications in artificial intelligence, was used across several industries and was facing a significant supply shortage. The prevailing belief was that these factors would keep prices moving higher.

What followed offered a reminder of the risks of chasing performance. Silver subsequently corrected 27%, falling much like a small-cap stock, as Naren had warned.

Gold attracted similar interest, although the inflows were slightly lower than those into silver ETFs. Naren attributed this to the difference in their previous returns. Gold had gained 116%, considerably less than silver's 216% rally. Nevertheless, gold also peaked in January before declining.

For Naren, the episode demonstrated how quickly investors can gravitate towards an asset simply because it has performed exceptionally well. The underlying investment case may sound convincing, but that does not eliminate the risks of entering after a substantial rally.

From silver to Korean stocks, the chase continues

Naren said this behaviour was not limited to precious metals. After silver, investors turned their attention to South Korea's stock market, represented by the Kospi index.

The pattern, he suggested, was familiar. Investors repeatedly move towards markets and asset classes that have already delivered strong returns, only to discover the risks when the momentum reverses.

That is why Naren believes anti-asset allocation is easy to practise, while genuine asset allocation is considerably harder. Buying an asset after a spectacular rally offers the comfort of knowing that others are making the same investment. Buying after a correction, particularly when sentiment is weak, requires conviction and patience.

Why Naren does not expect gold to return to its earlier valuation

Naren's caution against chasing gold does not mean he has turned negative on the metal or believes investors should avoid it altogether. In fact, he sees structural reasons why gold could continue attracting interest, even after its substantial rally.

He referred to the gold-to-equity ratio over a longer period, noting that there had been phases when gold was significantly undervalued. It became expensive briefly during the Covid period, turned cheaper again and subsequently delivered a strong rally.

However, Naren does not expect gold to revert to its earlier relative valuation levels. The reason, he explained, lies in a fundamental shift in how central banks view their reserves.

Also Read | ET Wealth Expo: US stocks epitomise anti-asset allocation; international debt better option: S Naren, ICICI Prudential MF

Following the impounding of Russia's oil and gold reserves, central banks began reconsidering their dependence on currencies such as the US dollar. The episode prompted concerns about keeping all their reserves in currencies, leading central banks to increase their interest in gold as an alternative reserve asset.

Naren believes this shift could continue to support gold until the underlying issue is resolved. In his view, this is why the metal may not experience the same degree of mean reversion that investors might expect based on historical trends.

But that does not mean investors should put all their money into gold. Naren's answer to whether investors should allocate their entire portfolio to the metal was an emphatic no. However, he does believe an asset should have some gold.

Also read: ET Wealth Expo | India is still in SIP accumulation phase; SWPs may gain relevance in 25 years: Vikas Khemani

His broader message is about the difference between allocating money to an asset and chasing its returns. An asset can have a strong long-term investment case without necessarily being attractive at every price. And when an investment becomes so popular that investors find it difficult to stay away, that may be precisely when they need to examine their allocation decisions more carefully.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)