In 2025, most investment portfolios performed strongly for the third consecutive year, driven primarily by solid growth in US stocks, which increased by approximately 18%. This rise, although slightly lower than the over 20% gains seen in 2023 and 2024, was bolstered by a weakening US dollar, leading to even higher returns from international stocks.
The portfolio in focus is allocated 60% to stocks, 20% to bonds, and 20% to real estate, yielding an overall return of 14.44% for the year. This is notably above the author’s long-term annualized return of 11.63% since 2004, contrasting with the average 5% real return they anticipate for future projections. The diverse portfolio strategy includes significant investments in both large-cap US stocks and select international equities.
Stock performance varied, with the total US stock market yielding 17.35%, while the total international stock market and small value stocks achieved returns of 32.65% and 44.81% respectively. Bonds also improved, with municipal bonds returning around 4.5%, aided by a reduction in interest rates by the Federal Reserve.
In real estate, however, returns were less favorable. The overall rate for the real estate sector was just 1.13%, highlighting a challenging environment due to rising interest rates.
Thus, the year proved beneficial for the overall portfolio health, contributing to a 24% increase in net worth, even as philanthropic efforts expanded. The author emphasizes that successful investing should focus on personal financial goals rather than comparisons with market indices.
Why this story matters
- Highlights the resilience of diversified investment strategies amidst varying economic conditions.
Key takeaway
- Long-term focus on individual financial goals is essential for measuring investment success.
Opposing viewpoint
- Some may argue that tracking against major indices is crucial for gauging performance relevance.
