A new year brings in a fresh set of expectations, ideas, and opportunities. But, as investors, we also carry the baggage of the previous year. What worked extremely well in the past year is still on top of our minds. The natural inclination is to chase the winning ideas of the previous year. But this approach often ends in grief for most investors.
This is especially true of years when particular asset classes or individual investments delivered their best multi-year returns. After such a spectacular year, there is a definite need to slow down, introspect and think like an investment contrarian.
Instead of chasing the best performers, it often makes sense to look at assets or companies which have not delivered in recent years. By chasing what is out of favour, you will end up buying assets which are more reasonably valued, carry a lower downside, and possibly have a long investment runway to scale them up in your portfolio.
Being a contrarian is a natural hedge against buying expensive assets. Being a contrarian simply for the sake of being contrarian can often make us buy assets too early or at the wrong time. While it is important to be contrarian, one should also ensure that the independent conviction in the contrarian ideas is absolute and adequate.
The stellar performers of 2025 have been silver and gold among asset classes. Within equities, public sector banks and metals have been the outliers. Clearly, nobody predicted the winners of 2025 at the beginning of that year.
Yet, every investor could have taken a contrarian stance and invested at least a part of their portfolio in precious metals. Similarly, participation in the right parts of the equity market was very much feasible.
It was crucial to think like a contrarian in an overvalued market, identify pockets of undervaluation, and explore scope for a valuation reset in specific parts of the equity market. This should be done every year. This process would throw up newer sector choices within, rotate the asset choices, and revise the asset allocation.
The asset choices and equity preferences of 2026 must be different from those of 2025. Now, every investor’s responsibility is to ensure correct asset positioning and timely equity choices.
