Otto Money Newsletter - 20 Dec 2025

Dear Reader,

As 2025 comes to a close, we thought a quick retrospective was in order. Here is a snapshot of how various asset classes that we invest in performed this year.

While silver was the standout performer, all asset classes other than Indian equities demonstrated above average returns! Here’s a set of one liners that capture how the markets played out this year:

1. Interest Rates stayed higher for longer.

2. The Indian economy slowed down, prompting government efforts to revive it.

3. AI Bubble Alarmists didn’t get their satisfaction (yet).*

4. Tariffs reshaped the global economy in interesting ways.

5. Momentum was the strongest factor in the US market.

6. Value factor dominated returns everywhere else in the world.

**We don’t deny the over valuations, but read below about the importance of staying invested.

Let’s look at our own investing journey through 2025 and what lessons we learnt.

1. Diversification Matters

Our personal and HNI portfolios did well because of Gold, International and REIT/INVITs exposure. Bonds acted as a stabilizer & buying power during drawdowns. We have highlighted the need for diversification in our blogs and previous newsletter editions. We’ll repeat - Diversification is the only free lunch in investing.

2. Valuations Matter Our advised retail MF portfolios outperformed their respective benchmarks in absolute terms and with lower volatility - delivering better risk adjusted returns*. High valuations and lower earnings growth made us keep the SMID exposure lower than benchmark, which worked in our favour. Credit is also due to our fund managers for deftly navigating uncertainties. * We can’t publicly disclose the performance due to SEBI regulations. WIP to enable this.

3. Timing Matters (for lumpsum)

We were able to give two calls to customers since May to deploy extra cash on dips. Those transactions improved XIRR. White CAGR is the best indicator of a fund performance, XIRR also accounts for the timing of cash flows. Well timed cash inflows into a portfolio (buying at lows instead of highs) do improve portfolio performance.

4. More money is lost waiting for corrections than in corrections.

This quote by Peter Lynch captures the essense of investing - one cannot know the future and fear can lead to losses. Most fund managers missed the midcap recovery from April onwards. Some investors went in for a high percentage of cash anticipating a deep correction, which never came. How many of you have a friend sitting on cash and waiting for Nifty to fall to 18,000 to start investing? By not taking extreme calls (like sitting completely out of the markets), and instead using judicious adjustments to asset allocation, our portfolios were able to outperform the benchmarks.

5. Nobody is right all the time, and some assets are hard to value.

While we got the estimate for Nifty right (hovering around 25,700 and buying on dips below 24,600), we did not get the Gold call right. We did a rebalance of Gold at $3300 / oz levels, but gold kept going up and settled at ~$4200/oz. There is no fundamental way to value gold (it has no cash flows) and any estimate is a best guess that uses some technical indicators. If any portfolio manager/advisor tells you that they don’t get some calls wrong, then they are likely running a Ponzi scheme like Bernie Madoff!

6. Position Sizing matters

Even though we sold a small portion of the gold allocation at $3300/oz, it did not hurt portfolio returns significantly. In a sample portfolio, gold went from 12% back to 10% per the strategic asset allocation. So we missed 25% run up on 2% - that’s a mere 0.5% difference in the portfolio returns. Lose small when wrong and win big when right, is the mantra followed by all good investors. This asymmetry in win loss ratios and payoffs is captured in the bet sizing formula - Kelly Criterion. We’ll direct the interested readers to watch this quick video to get an overview of the concept. If you’d like us to discuss this, please drop us a note with feedback and we’ll cover this in the future.

Finally, for our customers, we have changed some SIP allocations in medium and high risk portfolios - you’ll get a separate notification about the changes. This was a result of change in 2026 earning estimates for some factors.

This will be our last newsletter of 2025. We take this opportunity to thank you for your patronage and wish you seasons’ greetings.

Click below to read our Market Update - a compilation of important metrics for you.

Warm Regards,

Wealth Beacon Team

1. If you have feedback or haven’t already gotten your portfolio analyzed and streamlined, you may write to us at: contact@wealthbeacon.ai .

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