One of the biggest things I read about is the lag and high instances in and around bases. I have some tips that might help, and an explanation of how the game-engine works.
Valheim maps are divided into 64 x 64 "tiles" or "sections". After some extensive testing, I have concluded multiple things.
at any given time, 25 of these 64×64 sections will be fully loaded. The one you are standing in, and the surrounding 2 rings of sections.
the max draw distance for player built things is 180 units. HOWEVER, objects are still loaded if they are within the confines of point number 1. (i dont know about non-player built things. trees seem to have a higher distance)
even with the lowest draw-distance settings, those 25 sections will still load, they just dont render.
every fish, bird, rock, tree, enemy, etc etc adds to the instance count. Fish seem to have a limit as to how many will spawn but I cannot be sure of this. (In the ocean my instances would drop when moving to a new grid but quickly rise to match the previous number, new fish spawning in to compensate.)
So picking your base location is very important.
Water doesnt really affect things since fish have a low max spawn. however, there are a plethora of rocks and logs underwater that you cannot get to to remove which can cause hundreds of instances that are permanent.
The most important thing is to limit your base to be completely within a small number of the map sections. I have my 2nd base limited to a single 64×64 section and there is absolutely no lag whatsoever. No pc hang when walking through the base while another section loads. just perfectly smooth.
The easiest way to find these sections is to turn the settings to their lowest and look at the ground texture. You should see the seams between sections. Pop open the info box (f2) and look at the instances. now cross that seam and watch the number magically change. This can cause major loading issues and stuttering while simply walking through a base.
my original base was built in 5 sections (dunno how i managed to do that). so the game was constantly loading and unloading over 20 extra zones as I traveled from one part of the base to another. major stutter to say the least.
Source: https://www.reddit.com/r/valheim/comments/mfcnb8/reducing_lag_find_a_sweet_spot_before_you_build/