Our Best Advice of 2025
A year that defied forecasts and reaffirmed disciplined investing
By James Parkyn - PWL Capital - Montreal
As 2025 comes to an end, it’s a great time to reflect on the year gone by. It’s been turbulent, to say the least.
But amid the volatility, investors enjoyed a third consecutive year of exceptional returns—especially if they ignored the noise and stayed anchored in a disciplined long-term approach.
Here are our best nuggets of advice from the past year—perspectives worth carrying with us into 2026.
1. Ignore the pundits
After two years of stellar equity gains in 2023 and 2024, many pundits predicted a “lost decade” ahead and warned of inflation, geopolitical threats and political turmoil. Markets defied the gloomy forecasts.
Equities posted a banner year. The Canadian total stock market gained an impressive 29.96% year-to-date, while the U.S. total market shot up 17.17% in U.S. dollar terms as of the end of November.
International and emerging markets also enjoyed superb returns. Developed market large and mid-cap equities rose 23.83%, while emerging market large and mid-caps boasted a 26.76% gain.
The lesson: Invest based on a long-term investing strategy—not forecasts or emotions.
2. Diversification works
After years of U.S. equity outperformance, it was time in 2025 for Canadian and international stocks to shine. This underscores our often-repeated advice about the importance of diversification.
We can’t predict the winners of tomorrow. But if we stay broadly diversified across assets and locations, we can be sure to benefit from their rise.
Research supports this approach. We devoted a blog article to the UBS Global Investment Returns Yearbook 2025. It found that globally diversified portfolios generated higher risk-adjusted returns over the past 50 years than investing in only domestic assets in the vast majority of countries.
3. Valuations don’t help you time the markets
Some investors in 2025 grew nervous about excessive valuations after two years of outstanding back-to-back equity gains. But past such periods don’t give solid clues about what comes next.
Research shows that stock markets don’t necessarily underperform after new highs. In fact, booming markets are more likely to continue doing well than giving up their gains. One study we cited found that after a stock market rise of at least 100% in a single year, markets doubled again 26.4% of the time in the next five years. Only 15.3% of the time did they give back the entire gain.
That said, it is a good idea to periodically review your holdings and rebalance them to stay aligned with your target allocations.
4. Think twice about alternative investments
High-net-worth Canadians are often approached by advisors trying to sell them on alternative investments such as hedge funds. Data on hedge funds suggests investors should exercise extreme caution and skepticism, according to Raymond Kerzerho, PWL’s Senior Researcher.
In a three-article series, Raymond reviewed numerous studies about hedge funds and found that the returns offer mediocre returns, have complex, hard-to-understand fees and limited diversification benefits.
“Financial success depends on disciplined saving and investing, not fancy investment products that promise high returns,” Raymond concluded.
5. Passive beats active
Actively managed funds tend to underperform their passive peers and benchmarks. Morningstar’s U.S. Active vs Passive Barometer Mid-Year 2025 report measured active fund performance against passive peers net of fees.
It found that only 42% of actively managed mutual funds and exchange-traded funds beat their passive counterparts in 2024. Over 10 years, the underperformance was worse. Just 22% of active funds survived and beat their passive peers.
Similarly, SPIVA Canada Scorecard found that over 80% of active funds underperformed their benchmarks in 2024. Over 10 years, 93% of active funds underperformed their benchmarks.
6. Equities outperform—but volatility is the price of admission
Since 1900, global equities have returned 9.7% annually, far outpacing bonds (4.6%) and T-Bills (3.4%), according to the UBS Global Investment Returns Yearbook 2025. Meanwhile, inflation was 2.9% per year.
But investors have to be prepared for a rollercoaster ride to enjoy the gains. Equities were the most volatile asset class (with a 23.0% standard deviation fluctuation), compared to 13.2% for government bonds and 7.5% for T-Bills.
While the annual U.S. equity real return was 8.5% on average, this included years with a loss greater than 40%. There were also six years with gains over 40%.
7. Patience pays off
A dollar invested in a diversified international equity portfolio would have grown to over $16 after inflation since 1970—an extraordinary return of more than 1,600%, according to research by our Raymond Kerzerho.
“The stock market is a money-multiplying machine for long-term holders of globally diversified equity portfolios,” Raymond said. “All investors had to do was defer consumption and accept that volatility is inevitable.”
How much volatility? Markets experienced six bear markets (a 20%+ real decline) in the past 55 years—or 1.1 such declines per decade on average.
“Investors should hold on to their portfolio and expect bear markets as a normal part of investing,” Raymond said. “These periods are the entry price to join the club of successful long-term investors.”
The real risk is sitting out. It’s fitting to conclude with some wisdom from Warren Buffett: “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”
With this sage advice in mind, the PWL team wishes you a happy, healthy and prosperous holiday season—and a new year strengthened by the timeless lessons of discipline, patience and long-term perspective.
Find more commentary on personal finance and investing, our podcast, past blog posts, eBooks, model portfolios and market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website.