Gold prices reached record highs in the past year driven by global uncertainties and central bank purchases. So, if you had invested in gold mutual funds, you now probably hold a higher gold allocation than originally planned. In such cases, rebalancing helps you trim excess exposure and redirect funds to restore the intended portfolio balance.
But how do you go about it?
The easiest rule to follow is the 10% gold rule. In this article, we assess how you can rebalance your 2026 portfolio with this 10% gold rule.
What is the 10% Gold Rule?
The 10% gold rule refers to a common thumb rule popularised by wealth managers and personal finance guide. It simply states that investors should ideally maintain a 10% gold exposure in their long-term portfolios. The idea here is to have a potentially balanced portfolio that spreads investment risks across various asset classes like commodities, equities, and debt.
However, it is important to note that while many global asset management frameworks promote the 10% gold rule for diversification and hedging, this is not a one-size-fits-all rule. It depends on your investment horizon and risk appetite. So, if you’re investing in gold mutual funds, your allocation to the same will be tailored on the basis of these factors.
Here’s a more realistic illustrative asset allocation matrix that may help:
| Investor Type | Illustrative Gold Allocation | Chief Objective |
| Conservative | 10% | Capital safety |
| Moderate | 5%-10% | Balancing portfolio stability with growth |
| Aggressive | 5% | Inflation hedge and volatility buffer |
Disclaimer: The above table is for purely for information and illustration purpose. Please do not construe it as a recommendation or any type of advice.
What is Rebalancing Your Portfolio and when is it needed?
Portfolio rebalancing is the act of adjusting asset allocation in your investment portfolio to ensure that it suits your risk tolerance and investment objectives. This involves:
Redeeming certain assets
Reinvesting in other assets
You can approach portfolio rebalancing in one of the following ways:
Calendar-Based: You rebalance at fixed intervals (annually, semi-annually, or quarterly).
Threshold-Based: You rebalance when allocation to a particular asset moves more than the preset limit (typically 5%).
Hybrid: You evaluate at fixed intervals but only rebalance if the allocation drifts beyond the preset limit.
Why use Gold to Rebalance Your Portfolio?
If until now, your portfolio was limited to equities and debt, you can consider adding gold while rebalancing it for 2026. You can consider investing in gold ETF and other gold-related assets because:
Gold acts as an inflation hedge and store of value, helping you preserve your purchasing power when inflation is high.
Gold can help add diversification to your portfolio and manage volatility due to its low correlation with other assets like equities and bonds.
Gold is also a good crisis protection cushion since the value of gold typically tends to rise during periods of geopolitical tensions and wars.
Ways to add Gold to your Portfolio (without adding physical gold)
Physical gold was the preferred way of investing in gold earlier. But this method had several drawbacks like safety concerns, purity issues, and storage problems.
Today, you don’t need to buy physical gold jewellery or coins to invest in gold. You can now rebalance your portfolio by investing in gold ETF fund of funds, gold ETFs
Here’s a list of ways you can rebalance your portfolio in 2026 with gold:
1. Gold ETFs
Gold ETFs are passively managed funds that invest in gold. They track the price of physical gold in the domestic market and aim to offer returns in-line with these prices, subject to a tracking err
Here’s what you need to know about gold ETFs:
2. Gold ETF Fund of Funds
Gold fund of funds are open-ended mutual fund schemes that invest in gold ETFs. These gold ETFs are backed by actual gold that holds high purity (99.5%) gold to track changes in the domestic price of the precious metal, subject to a tracking error.
Here’s everything you need to know about investing in gold ETF fund of funds schemes:
Disclaimer: Investors are requested to note that they will be bearing the recurring expenses of the fund of funds scheme, in addition to the expenses of underlying scheme in which the fund of funds scheme makes investments.
Step-by-step guide: How to rebalance your portfolio based on 10% Gold Rule
Regardless of whether you want to pick gold ETF fund of funds or gold ETFs for rebalancing, understanding how to go about is equally important. That’s why we’ve listed a simple step-by-step guide on how to rebalance your portfolio:
Step 1: Review Your Portfolio Annually/Semi-Annually
Review your portfolio annually or semi annually or any other preferred frequency to see how it is performing. Track how each asset class performs during this time and check if your asset allocation has moved away from the original set-up.
For instance, if equities rallied last year, your portfolio may have drifted to become equity-heavy. Typically, experts suggest to rebalance portfolios if your mix moves more than 5% from your original allocation.
Step 2: Check Your Gold Exposure
If you have already invested in gold ETF fund of funds/gold ETFs or have SIPs running, evaluate the total value of these investments in gold. Convert them into a ratio of your overall portfolio value and see how much exposure of gold you currently have.
Upon review, you will likely see one of two things. Either:
Your gold exposure will be above 10%
Your gold exposure will be below 10%
Step 3: Take Action
Consider these steps once your assessment is complete:
Above 10%: If your exposure in gold is above the general 10% threshold, consider selling overweight assets. Try to reallocate funds to equities/debt (based on your goals, risk tolerance, and target asset allocation).
Below 10%: If you haven’t yet included gold into your portfolio or your exposure to gold is below the 10% limit, consider boosting this allocation. You can consider options like gold ETF FoF funds and gold exchange traded funds that invest in gold for this purpose.
Please note that rebalancing your portfolio is not a one-time action. You need to do it periodically, alongside monitoring the performance of your investments.
Common mistakes to avoid when adding Gold to your portfolio
Here are a few common mistakes you should avoid when adding gold mutual funds or any other gold-based asset to your portfolio:
Chasing gold mutual fund returns: Buying when the markets are high and selling when there’s a price swing can lead to missed opportunities. Definite rules like the 10% gold rule may be a better option in such cases.
Ignoring cost differences between various gold products: The investment costs you incur can impact your total returns. For instance, gold ETF fund of funds typically have a higher expense ratio than gold ETFs because they will be bearing the recurring expenses of the fund of funds scheme, in addition to the expenses of underlying scheme in which the fund of funds scheme makes investments.
Allocating to gold excessively without considering risk: This can lead to increased volatility. Remember that the 10% gold rule is indicative and can (and should) be tailored to your risk tolerance.
Failing to contextualise rebalancing: Please remember that rebalancing your portfolio for gold also means reviewing and correcting other asset imbalances. So, check if your equity and debt allocations also need change and make buy/sell decisions accordingly.
Conclusion
So now you know how to rebalance your 2026 portfolio with the 10% gold rule. All you have to do is:
Review your portfolio
Check your current gold exposure that includes gold ETF fund of funds, gold ETFs, etc.
Redeem or invest more depending on where your allocation stands vis-a-vis the 10% rule
But do remember to tailor the 10% rule to fit your investment horizon, risk appetite, and goals while rebalancing. This way, you can use a specific guideline to avoid random buys/sells, while still remaining true to your investment needs.
Disclaimer:
An Investor Education and Awareness Initiative by Tata Mutual Fund.
To know more about KYC documentation requirements and procedure for change of address, phone number, bank details, etc., please visit: https://www.tatamutualfund.com/deshkarenivesh
Please deal only with registered Mutual Funds, details of which can be verified on the SEBI website under ‘Intermediaries / Market infrastructure institutions.’
All complaints regarding Tata Mutual Fund may be directed to service@tataamc.com and/or https://scores.sebi.gov.in/ (SEBI SCORES portal) and/or https://smartodr.in/login
Nomination is advisable for all folios opened by an individual, especially with sole holding, as it facilitates an easy transmission process.
This communication is a part of the investor education and awareness initiative of Tata Mutual Fund.
Invest and forget! That’s not how investing in mutual funds works. Instead, it is an ongoing process that requires regular assessments. While your idea may be to stay invested for the long term, it is important to review your mutual fund portfolio periodically.
But why? That’s because both the market and your financial goals aren’t static! Over time, your investment objectives, income, and risk-taking ability may change. Similarly, the market conditions also shift, which can affect how your funds perform.
Thus, you must make periodic analysis of your mutual fund portfolio to see if your investments are still suitable for your goals and current financial situation.
Okay, but how to do this? Read this article to learn five different ways you can review your mutual fund investment plans in 2025.
5 Techniques to make a thorough Mutual Fund Portfolio Review in 2025!
If you are a serious long-term mutual fund investor, ideally, you should review your portfolio at least once a year. Such a yearly review allows you to:
Spot underperforming funds
Check if your asset allocation is suitable as per your financial goals
Decide whether you need to add, switch, or reduce any investments
Additionally, regular reviews also keep you informed about the latest market trends. Need assistance? Below are five techniques you may follow in 2025 to make a detailed analysis of your mutual fund portfolio:
1. Compare Each Fund’s Performance with Its Benchmark
Start with a detailed mutual fund comparison. Check how each fund has performed compared to its “benchmark”.
For those unaware, a benchmark acts like a reference point and shows how well a mutual fund is performing in comparison to the overall market or a particular segment. For example,
Large Cap Category Fund uses the Nifty 100 as its benchmark.
Now, this means the fund’s returns are compared against how the Nifty 100 has performed over the same period.
How to Apply This Review Technique?
Firstly, check your fund’s benchmark on its factsheet on the AMC’s website. Then, compare the fund’s returns with the benchmark’s returns over different time periods, such as 1 year, 3 years, 5 years, and since inception. Now, there could be two possible scenarios:
| Scenarios/ Aspects | A) Fund “Outperforms” Benchmark | B) Fund “Underperforms” Benchmark |
| What does it mean? | If the fund’s performance is higher than the benchmark, it shows that the fund manager has added value by making smart investment decisions. | If it regularly underperforms, it means the fund is not keeping up with the market expectations. |
| What can you do? | You may continue with the scheme. | You may need to review whether it still fits in your portfolio. |
2. Check the Fund’s Expense Ratio
Every mutual fund charges a small yearly fee called the “expense ratio”. This covers the cost of:
Managing and running the fund
Administrative charges
Operational expenses
Usually, it is shown as a percentage of your total investment. Please note that even though it may look small, a higher expense ratio can reduce your overall returns over time.
How to Apply This Review Technique?
Compare your fund’s expense ratio with the average ratio of similar funds in the same category. For example, if most funds in your category charge 1%, but your fund charges 2%, that’s worth noting!
Be aware that passive funds usually have a lower mutual fund expense ratio because they simply track & replicate the market without Fund Manager’s Active Investment Strategy.
Now, in contrast, actively managed funds charge higher expense ratio. However, that extra cost is only reasonable if the fund regularly performs better than its benchmark.
3. Review the Fund’s Past Performance
Before continuing with any type of mutual fund, it is important to see how it has performed in the past. By studying a fund’s history, you can learn how it has handled different market situations (both when the market was rising and when it was falling). Ideally, a fund that performs well in both good and bad times may be preferred.
Note – The past performance of the mutual funds is not necessarily indicative of future performance of the schemes.
How to Apply This Review Technique?
Check the fund’s performance over different time periods, such as 1 year, 3 years, 5 years, and since inception. Now, compare these results with other similar funds. You may obtain any of these two results:
| Results/ Aspects | Result I: Your Fund’s Returns are “Higher” than the Peers | Result II: Your Fund’s Returns are “Lower” than the Peers |
| Interpretation | If your fund’s returns are higher than most similar funds, it shows that the fund manager is making strong investment choices and delivering better-than-market results. | If the fund’s returns are lower than its peers, it indicates that the fund is underperforming compared to peers. |
| Your Potential Action | Your fund is performing “above average”, and you may continue investing in the scheme. | You might want to monitor it more closely or consider switching to a better-performing fund. |
4. Check How Diversified Your Mutual Fund Investment Plan Is
A diversified fund spreads its investments across:
Different sectors (like banking, technology, and healthcare)
and
Asset types (like stocks, debentures, and cash instruments).
Such a mixing reduces the impact of a poor performance in any single sector or asset. For example,
Say the technology sector falls sharply.
Now, gains in banking or healthcare holdings can offset some of these losses.
This keeps the overall portfolio relatively stable.
Similarly, several fund managers combine stocks with bonds to reduce mutual fund risk, as bonds are generally less volatile than stocks.
How to Apply This Review Technique?
While reviewing your fund’s strength, check for these three major parameters:
| Parameter | What Should You Look For? | Why is it Important? |
| Asset Allocation |
|
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| Sector Exposure |
|
|
| Quality of Holdings |
|
|
5. Understand Risk-Adjusted Returns
When reviewing mutual funds, don’t focus only on how much return they have given. It’s equally important to see how much risk was taken to achieve those returns. For example,
Now, even though both gave a 10% return, Fund B took more risk to achieve it. If the market drops, Fund B’s NAV could fall much more than Fund A’s. This is why looking at risk-adjusted returns is important.
How to Apply This Review Technique?
To understand the relation between risk and reward, you may refer to these three risk-adjusted metrics:
| A) Standard Deviation | B) Beta | C) Sharpe Ratio |
|
|
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Conclusion
So, as an investor, you now know that mutual fund investment is not a one-time activity. You should make regular periodic reviews to check whether your mutual fund investment plans are serving your financial goals, risk tolerance, and market conditions.
To make a thorough review, you can follow these techniques:
Check if the fund’s returns outperform its benchmark over 1, 3, 5 years and since inception.
See whether the fund’s costs (expense ratio) are reasonable compared to similar funds.
Study past performance and look for managerial consistency.
Evaluate asset allocation, sector exposure, and quality of holdings.
Look at standard deviation, beta, and Sharpe ratio to assess risk versus return.
Disclaimers
An Investor Education and Awareness Initiative by Tata Mutual Fund.
To know more about KYC documentation requirements and procedure for change of address, phone number, bank details, etc., please visit: https://www.tatamutualfund.com/deshkarenivesh
Please deal only with registered Mutual Funds, details of which can be verified on the SEBI website under ‘Intermediaries / Market infrastructure institutions.’
All complaints regarding Tata Mutual Fund may be directed to service@tataamc.com and/or https://scores.sebi.gov.in/ (SEBI SCORES portal) and/or https://smartodr.in/login
Nomination is advisable for all folios opened by an individual, especially with sole holding, as it facilitates an easy transmission process.
This communication is a part of the investor education and awareness initiative of Tata Mutual Fund.
Mutual funds can seem overwhelming if you are new to investing, but they can generally be divided into two categories: active funds and passive funds. Both active and passive funds have their own unique benefits and can complement each other in a well-rounded portfolio. Active funds tend to be more popular. However, passive funds may also offer an alternative for building wealth.
In this blog, we’ll dive into the world of passive funds, exploring what they are and why they might be worth considering.
Passive funds are mutual funds that follow a market index, like the Sensex or Nifty. These funds invest in the same stocks and in the same proportions as the indices they track.
The big difference with passive funds is that the fund manager doesn’t have to pick and choose which stocks to invest in. Instead, they simply copy / replicate an index. For example, if a passive fund is tracking the Nifty 50 index, it will invest in the stocks of the 50 companies that make up that index in the same proportion.
Passive funds come with several benefits that make them appealing to investors. Let’s break them down:
Whether you decide to invest in active or passive funds depends on your financial goals, risk appetite, and investment timeline. If you’re new to investing and feel overwhelmed, consider passive funds as a simpler, lower-risk option. You may consider consulting a mutual fund distributor to find the right fit for you.
Disclaimers:
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Do you prefer a simple approach to investing? If yes, passive mutual funds are good to explore. These funds replicate an index or follows an index composition and hence try to mirror the index returns. That is why they are called passive funds. These are simple to understand and do not need constant supervision like an active fund.
In this blog, we’ll go over a checklist to help you get the most out of your passive investments.
When investing in passive mutual funds, it's important to think about your goals, risk tolerance, and how long you want to invest. Here are some strategies that may effectively help you enhance your investment outcomes:
Before you invest, decide what you’re saving for. Are you planning for retirement, growing your wealth, or saving for your child's education? Clear goals will help you determine your time period and the risk you could take respective to that goal money. This will help you choose the relevant passive fund.
Diversification means spreading your investments across different asset types, sectors, and market caps. Passive mutual funds could help you do this. Depending on your investment objective you could choose the respective index based passive fund. By diversifying, you manage and optimise the risk and increase the potential for your portfolio performance.
Understanding your risk tolerance is crucial. Some passive funds, depending on the index composition, may provide moderate returns, while others might be more volatile. Select funds that align with your comfort level and ensure they do not jeopardize your financial goals
Passive investing is effective over a long period. Stick to your plan and avoid reacting to short-term market changes. Keeping a long-term mindset will help you ride out market ups and downs.
Check your investments regularly to ensure they still align with your goals and risk tolerance. If needed, rebalance your portfolio to maintain the right mix of assets and risk. This could help optimize your returns.
Passive mutual funds are becoming increasingly popular in India. They let you benefit from market growth without the need for constantly monitoring the market, by simply following the respective index with an aim to mirror the performance of a benchmark index. To make better investment choices, it's important to understand the structure of different types of passive funds—like index funds, ETFs, and fund of fund.
By setting clear goals, diversifying your portfolio, knowing your risk tolerance, and keeping a long-term perspective, you could build a passive investment strategy that helps you achieve your financial goals.
Disclaimers:
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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