It is advisable to review your investment strategy periodically. As we approach 2025, the global economic landscape is offering unique opportunities for investors. The conflicts between Ukraine-Russia and Iran-Israel, along with disappointing corporate earnings and stubborn inflation, characterized 2024 as a year dominated by risk aversion.
Safe haven investments such as Gold and Silver have outperformed riskier assets, showing a significant surge of 25.25% and 23.11%, respectively, in the calendar year 2024 up to December 25. In contrast, popular equity benchmarks like the BSE Sensex and NSE Nifty50 have seen modest gains of around 9% each over the same period.
In 2025, financial experts advise investors to consider increasing their allocation to Gold and Silver compared to last year in order to potentially achieve higher returns. For investors with a moderate risk tolerance, a recommended portfolio for 2025 would involve investing 50% of their portfolio in large-cap stocks, 35% in gold, and 25% in fixed income assets.
Given the current geopolitical tensions and their potential impact on the global economy, it is wise for investors to prioritize investing in Gold in 2025 due to its historical reputation as a reliable store of value. Additionally, the ongoing trend of central banks worldwide increasing their reserves of gold suggests the potential for higher returns in the future.
“With the current ongoing war-like situation and its impact on the world economy, it is prudent that investors resort to investing (more) in Gold in 2025 as it has proved to be a reliable store of value. Besides, central banks, world over, are adding the yellow metal to their reserves, suggesting higher returns going ahead,” Apurva Sheth, head of market perspectives and research, SAMCO Securities, noted.
Gold investment
As we approach the dawn of 2025, gold and silver continue to stand out as prime investment choices in light of ongoing global economic and political instability. The consistent acquisition of gold by central banks, particularly China, coupled with expected interest rate cuts by the Federal Reserve, suggest a favorable outlook for gold in the coming months.
Analysts attribute the rise in gold prices to fluid global economic conditions and increased demand by central banks. Central banks worldwide reportedly accumulated more than 500 tonnes of gold reserves in 2024.
In India, assets under management (AUM) in gold and silver ETFs exceeded Rs 30,000 crore and Rs 7,500 crore, respectively, in the same year. The Central government’s reduction of import duties on gold and silver in Union Budget 2024 is believed to have contributed to this surge in demand.
From $2,091 per ounce at the end of 2023, the price of gold has climbed to over $2,600 per ounce, reaching a record high of $2,826.3 per ounce on October 30, 2024.
A recent report by the World Gold Council suggests that gold is on track for its strongest annual performance in more than ten years. However, market experts anticipate more modest growth for gold in 2025 based on key macroeconomic variables such as GDP, yields, and inflation.
Analysts predict that silver may continue to see upward momentum in 2025 due to increased industrial demand and supply chain constraints. Despite some recent declines, they expect silver prices to be supported in the range of Rs 85,000-Rs 86,000 per kilogram, with targets reaching Rs 1,11,111 and Rs 1,25,000 domestically and $38.55 and $43 on Comex. Manav Modi, a commodity analyst at Motilal Oswal, advised buying on dips during this time.
Equity investment
According to analysts, equities are often considered the “best asset class” due to their ability to generate wealth over a long-term period. In particular, large-cap stocks are recommended as the go-to option for investors.
The remarkable upward trend in the Nifty and Sensex was disrupted in late September due to a significant amount of foreign institutional selling following disappointing domestic earnings, a rebound in Chinese equities, a stronger dollar, and an increase in US bond yields following Donald Trump’s victory in the US presidential election.
Although the equity rally showed signs of weakness in the October-December 2024 period, small-cap and mid-cap stocks surprised market participants with their resilience. The Nifty Midcap 150 and Smallcap 250 indices saw impressive gains of 26.32% and 28.6%, respectively, during this time frame, driven by continued investments from domestic investors who historically favored larger companies.
While small-cap and mid-cap stock valuations may seem overextended, the risks associated with investing in these segments appear to be heightened.
Vinod Nair, head of research at Geojit Financial Services, said that in a multi-asset strategy for 2025, the focus should be on large-cap stocks over mid-and small-caps in the short to medium term. This recommendation is based on the higher valuation of the overall market and the peak premiumization of mid-cap stocks.
In his recommendation, Naveen Kulkarni, CIO at Axis Securities, suggests that individuals with a high risk tolerance should consider heavily investing in equities. For those who prefer a more balanced approach, Kulkarni advises a distribution of 60% in equities, 30% in debt, and 10% in gold.
He noted that while the outlook for gold may not be as bullish as in previous years, the potential for rate cuts in India makes debt investments attractive. Kulkarni further emphasized the importance of focusing on shorter-term maturities in fixed income investments.
Debt funds
As of 2023, debt funds have experienced a reduction in popularity due to alterations in tax regulations. However, they continue to outperform bonds and fixed deposits. Following the decision by the Reserve Bank of India to maintain policy rates, analysts suggest that debt funds may perform favorably in the upcoming months.
When it comes to investing in debt securities, experts said one should focus on fixed income assets with a 3-4 year tenure. This duration is considered a favorable sweet spot due to the rate cuts implemented by the Reserve Bank of India (RBI), which are expected to push down the yield curve. It is worth noting that yields on 10-year Government Securities have decreased by approximately 6% in 2024, fluctuating between 6.66% and 7.24% throughout the year.