Should investors go after hot investments? Here's what experts think about chasing top winning assets

When markets deliver spectacular returns, investors often feel an irresistible pull toward the hottest-performing assets. From small-cap funds to silver, recent winners tend to attract disproportionate attention. But market experts caution that while chasing top performers is a natural behaviour, it can be dangerous without a disciplined framework.

Dhirendra Kumar, CEO and founder of Value Research, explains that investors are hardwired to believe that what is working now will continue to work. “People chase recent winners as they expect that what is currently on will continue for a while, if not forever,” he said in a recent podcast. According to Kumar, this tendency is particularly strong among newer investors, who often mistake momentum for permanence.

Importantly, Kumar notes that market trends rarely emerge without reason. “These trends don’t change on a calendar year-end. They are rooted in some basis,” he said. A rally may be driven by rising demand, improving earnings, policy changes or a sector emerging from a prolonged downturn. As prices rise, more investors pile in, reinforcing the move. “People are buying because prices are going up, and because prices are going up, people are buying more,” he said, describing the classic self-fulfilling cycle of momentum investing.

However, Kumar warns that no trend lasts indefinitely. Markets are cyclical, and mean reversion eventually asserts itself. “Reversion to mean is a very powerful thing,” he said, adding that investors often ignore warning signs when returns feel too good to give up. Even when doubts emerge, “you still don’t want to believe it,” he noted.

Gold, silver in 2025 vs others

Gold and silver in 2025 were clear winners after decades of nominal growth. Gold has risen roughly 70% so far this year, while silver has jumped over 150%, making 2025 one of their strongest years in decades. Heightened geopolitical tensions, including strains between the US and Venezuela, have fuelled demand for safe-haven assets. A softer US dollar and growing expectations of interest-rate cuts have further boosted the appeal of non-yielding metals such as gold. 

Gold prices on the Multi Commodity Exchange of India (MCX) have surged nearly 78% over the past year, rising from ₹75,233 on December 20, 2024, to ₹1,33,589 on December 22, 2025. Silver has delivered even stronger gains, jumping 144% in the same period from ₹85,146 to ₹2,08,062 per kg. In contrast, the benchmark Nifty 50 index advanced just 10.18%, prompting many investors to pivot towards gold and silver as preferred investment options.

Small caps in 2023, 2024

Small-cap funds offer a recent example. After delivering exceptional returns in 2023 and 2024, many investors began to believe small caps were no longer risky. Kumar explained that the rally was fuelled by massive inflows into a tightly defined universe of stocks. “When you have too much money chasing a certain defined universe, prices get pushed up,” he said. With promoters often holding around 50% of shares, the available free float in small-cap stocks is limited, making them especially sensitive to large inflows.

Concerns around valuations did surface in early 2025, but Kumar argues the subsequent correction was not a catastrophe. “After a year when small caps went up by 60%, followed by another year of 50%, a year of being down 10% is not a disaster,” he said. The episode, however, served as a reminder that past returns are a poor guide to future performance.

Silver’s sharp rise in 2025 sparked similar behaviour, with some investors treating it like “the new Bitcoin.” Kumar believes silver’s rally has stronger fundamentals. “Silver has found a new utility,” he said, pointing to rising demand from renewable energy and industrial applications. Financialisation through ETFs has also created a fresh demand stream. On the supply side, “silver cannot be stepped up on demand,” since it is largely a by-product of zinc mining, he explained.

So should investors participate in hot assets at all? Kumar’s advice is pragmatic rather than prohibitive. “Try it, but in a limited way,” he said. Allocations of 5–10%, he suggests, allow investors to benefit from trends without risking financial stability. “Don’t go 100%, don’t go 50%,” he cautioned.

Ultimately, Kumar stresses the importance of structure and discipline. “Have a plan and be anchored to a diversified portfolio,” he said. Asset class leadership rotates—small caps, value stocks, PSUs, commodities and large caps have all taken turns. The key lesson, he concludes, is simple: “Outliers can be temporary, but discipline is permanent.