It’s that time of year again when the media dutifully rolls out its predictions for the coming twelve months. Where will the Sensex be by December? Which sectors will outperform? What will happen to interest rates? I’ve been watching this ritual for three-plus decades now, and I must confess I’ve never found much use for it. The predictions are forgotten by February, and if anyone bothered to check them against reality by year’s end, the results would be embarrassing for all involved.

Inherently unpredictable

The fundamental problem with annual predictions isn’t that forecasters are incompetent. Some of them are quite clever. The problem is that the things worth predicting are inherently unpredictable, and the things that are predictable aren’t worth much. No one predicted the pandemic that reshaped our lives in 2020. No one foresaw the speed of the subsequent market recovery.

The regulatory changes that transformed the mutual fund industry, the rise and fall of various market favourites, the policy shifts that upended certain sectors — these arrived without advance notice from the prediction industry.

Looking back at my own columns from years past, I notice I’ve made this same argument many times earlier. In 2017, I wrote about what investors should do in 2028, making the point that sensible investment advice doesn’t change from year to year.

If your financial strategy requires annual recalibration based on market forecasts, something is fundamentally wrong with your approach. That observation remains as valid today as it was then, which rather proves the point. So instead of predictions, let me offer some observations about the landscape as it stands, without claiming any special insight into how things will unfold.

Derivatives still in vogue

The enthusiasm for derivatives trading among retail investors shows no signs of abating, despite mounting evidence that it destroys wealth for the vast majority of participants. Sebi’s data showing that nine out of ten individual traders lose money in futures and options has done little to dampen the fervour.

The gambling instinct is powerful, and the infrastructure to exploit it grows more sophisticated each year. My observation, not prediction, is that this poverty-creation machine will continue to separate many Indians from their savings.

The mutual fund industry continues to grow, which is broadly positive for retail investors. SIPs have become embedded in middle-class financial behaviour in a way that seemed unimaginable twenty years ago.

The challenge now is not convincing people to invest but helping them resist the temptation to complicate what should remain simple. Three or four well-chosen funds remain sufficient for almost everyone, regardless of what product manufacturers would have you believe.

Exercising prudence

Insurance mis-selling persists as stubbornly as ever. The gap between what customers need and what they are sold remains vast. Term insurance, which is what most families actually require, continues to be under-sold relative to expensive traditional policies and ULIPs that enrich distributors at the customer’s expense. I see no reason this will change in 2026, because the incentive structures that drive it remain intact. Try not to fall for this trick.

What should you actually do in the coming year? The same thing you should have done last year and the year before. Map your financial needs along a timeline. Keep money needed within two or three years in fixed income.

Invest longer-term money in a small number of diversified equity funds through systematic plans. Maintain adequate term insurance and health coverage. Keep emergency funds accessible. Avoid speculation dressed up as investment.

This advice is boring precisely because it works. It doesn’t change based on election outcomes, geopolitical tensions, or the predictions of market strategists. The investor who followed this approach in 2015 is better off today than the one who tried to time markets or chase whatever sector was fashionable that year.

The coming year will bring surprises. Some will be pleasant, others won’t. Markets will move in ways that seem obvious in hindsight but weren’t predictable in advance. The sensible investor’s response to all this uncertainty is not to predict better but to build a portfolio robust enough to weather whatever arrives.

Happy New Year. May your investments be boring and your returns be adequate.

Dhirendra Kumar is founder and CEO of Value Research