For the third year in a row, most portfolios just crushed it in 2025. Once more, everything from cash to real estate made money (although Bitcoin was a notable exception). While US stocks, which rose about 18%, didn't do quite as well in 2025 as in 2023 and 2024 (when stocks rose more than 20%), they still had a wonderful year. Solid stock returns combined with a weakening dollar meant that international stocks did even better.
Each year, I try to discuss the investment returns our portfolio saw for both transparency and educational purposes.
Our Portfolio
As a reminder, our portfolio (asset allocation) is 60% stocks, 20% bonds, and 20% real estate, broken down as follows:
60% stocks:
- 25% Total US Stock Market
- 15% Small value stocks
- 15% Total International Stock Market
- 5% International small value stocks
20% bonds:
- 10% Nominal bonds
- 10% Inflation-protected bonds
20% real estate
- 5% Publicly traded REITs
- 10% Private equity real estate
- 5% Private debt real estate
Note that this is just our retirement portfolio, and it does not include UTMAs, 529s, our kids' Roth IRAs, HSAs, cash reserves, small businesses, etc. The asset allocation (but not overall retirement account performance) also ignores a small cash balance plan. If you care, the 529s (19.95%) and UTMAs (24.06%) did awesome this year (both are half international stocks), the Roth IRAs (24.06%) did great (target retirement funds), and the HSAs (17.14%) had another banner year (now nearly 100% FZROX). Our children's portfolios outperformed ours, again, this year. At least we beat my parents (their portfolio is 50% bonds).
Investing Is a Single-Player Game
On that note, this seems a good time to remind readers that investing is a single-player game; you against your goals. So, compare your returns to the returns you need to achieve your financial goals. If you really need a bad guy to compete against, use inflation. In 2025, inflation, as measured by CPI-U, was a little under 3%.
When I run long-term portfolio projections, what I use for my investment returns is a real (after inflation) 5% return. If I want to see how my portfolio is doing against what I need it to do to reach my goals, why not compare it to that? Three percent inflation plus 5% real = 8%. I should ask myself, did I beat 8% this year? Did I beat it over the last decade or two? But what I don't do is compare my returns to your returns or even to the S&P 500 or other popular indices. They're all irrelevant to the game I'm playing here.
More information here:
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2025 Portfolio Performance
The performance of our overall retirement portfolio (including the cash balance plan) for 2025 was 14.44%. Since we started investing in 2004, our annualized returns have been 11.63%, far higher than the 5% real (8%ish nominal) with which I have traditionally run my projections. Future returns are probably unlikely to be as high, given the sustained mostly bull market of the last 15 years.
Now, 14% is lower than the 2025 S&P 500 return of 18% and much lower than the performance of a total international stock index fund (34%). Nevertheless, we've chosen to diversify, and over the decades, we have been glad that we did. Diversification means always being unhappy with something you own.
Stock Performance
Our stock portfolio is still just as boring as ever. Twenty-five percent of the portfolio is in the total stock market via VTI and its tax-loss harvesting partner ITOT, and we made 17.35% in that asset class this year. Fifteen percent of the portfolio is in US small value stocks. Thanks to new investment and extensive charitable donations, we've completed our transition from VBR and its tax-loss harvesting partner VIOV to AVUV and its tax-loss harvesting partner DFSV. Our return for the year in the newer holdings was 13.63%, but that was heavily influenced by the timing of the change, as VBR actually had a better year than AVUV.
Fifteen percent of the portfolio is in the Vanguard Total International Stock Market ETF (VXUS) and its tax-loss harvesting partner IXUS. We made 32.65% there. Five percent is in international small value stocks, and, in 2025, we also completed a transition from VSS to AVDV and DISV, thanks again to a large amount of charitable giving. We actually made 44.81% in AVDV/DISV this year, although, again, that return was heavily influenced by the timing of the transition. The 2025 time-weighted returns were 30% for VSS and 49.37% for AVDV.
This was our best asset class for 2025. Too bad it's only 5% of our portfolio.
Bond Performance
Our bond portfolio did much better in 2025 than in 2024 when returns were barely positive. There was a tailwind in bond returns with the Fed reducing interest rates. On the nominal side (10% of our portfolio), we made just 4.48% in muni bonds and 4.42% in the cash-like G Fund. We're doing some simplifying transitions this year on the inflation-indexed side (10% of our portfolio), having eliminated our I Bonds and putting all new money into a TIPS ETF rather than any individual TIPS. Our SCHP investment made 6.66%, our individual TIPS made 2.28%, and our I Bonds (eliminated in November) made 2.36%.
Real Estate Performance
When I have done a post like this in the past, we have gone through all the gory details of all of our various private real estate investments. This year, we decided to just save those details for those subscribed to the WCI Real Estate Newsletter. If you're interested, make sure you're subscribed. It's free, and you can unsubscribe at any time.
For this post, we'll just do the abbreviated version. Real estate didn't have an awesome year, especially compared to stocks. Our allocation includes 5% on the debt side of real estate, where we earned 9.83% (pretty much what we usually get there). It also includes 5% into publicly traded equity REITs using the Vanguard Real Estate Index Fund, where we earned 3.13%. The other 10% is in private equity real estate, mostly via diversified funds. The rise in interest rates has not been kind to real estate for the last few years (the Vanguard fund still has a negative cumulative return for 2022-2025), and that's reflected in our returns on the private side. It was just 1.13% overall for us this year. Some investments did OK, and thankfully, our largest ones did. Some did not do well at all, but thankfully, those were mostly smaller investments for us. Again, if you're interested in the details, make sure you're subscribed to that real estate newsletter.
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Your Crystal Ball Predictions for 2026
Overall, 2025 was a great year for most investors, including us. Our 14%+ portfolio returns certainly went a long way toward the 24% increase in net worth we enjoyed in 2025, despite giving away much more money in 2025 than in any prior year. Our focus on the five money activities (earning, saving, investing, spending, and giving) is certainly focused more and more on the last two each year, but it's a good idea to keep an eye on the third one (investing) too.
What do you think? How did your portfolio do in 2025? What were your winners and losers?