Devina Mehra: Are you driving your investment portfolio by looking at the rearview mirror?

You know what will happen if you drive looking at the road that is already behind you? Ignoring both the dangers and opportunities ahead? That is what I thought of when I saw that inflows into Indian gold exchange traded funds (ETFs) exceeded flows into equity funds in January 2026.For context, in March and April 2025, gold inflows were hugging the zero line even as equity mutual fund flows were at pretty much the same level as in January—around ₹24,000-25,000 crore. Now the dollar price of gold is down 20-25% from its January peak. But this is not a column about gold.

I have already written about gold prices earlier explaining that this metal has been historically a more volatile asset than equities and its 1980 high was not crossed for 27 long years. The general point here is about chasing returns in whatever has done well of late, whether it is an asset class, country, sector or market cap category or even an investment strategy. Just as you will crash your car if you drive looking backwards, data shows that if you systematically invest in themes, asset classes or geographies that have done well in the previous period, you will equally systematically underperform.

However alluring it looks, planning your future path based on the road behind you simply does not work. Now something closer home. Most investors invest in a particular mutual fund or portfolio management services (PMS) scheme based on recent performance.

Let us see how well this strategy works. DSP, in its January issue of Netra, collated data on mutual fund schemes in the top quartile (the top 25%) in their category for 3 years and found that 60-100% of them were not in the top quartile in the succeeding 3 years. They did it across eight time periods and