Diversification Matters When Markets Get Uncomfortable
Hello,
"Did we lose what we made last year?"
This was a question I received in a recent client meeting. They were asking if in 2025 had we already lost what we made in 2024. As you may know, 2024 was a solid year in the markets.
2025 seems to be off to a bumpy start, but has it really been?
If you're just following the US markets you would be correct, it's been a bit bumpy although as of this writing it has not been too bad overall.
2025 has been a year where diversification has played an important role. Let's not just look at the US but other asset classes such as international and alternatives.
As of this writing March 25th, 2025 below are the following returns so far this year:
US Total Stock Market: - 2.04% Small Cap Value: - 7.35% International Developed Markets: + 9.35% International Small Value: + 8.96% Emerging Markets: + 3.74% Reinsurance: + 0.34% Alternative Lending: + 1.12% Corporate Lending: + 2.07% Diversifying Strategies Fund: + 1.37%
Mixed together you would come out + 0.69% on the year. Nothing to write home about, but this particular client was thinking they had lost everything they made last year.
While it seems the political sphere has been chaotic as well as the markets, let's remember that we own BUSINESSES that go to work everyday to make a profit regardless of everything else going on in the world.
That is truly passive income, buying ownership (stocks or preferably a basket of stocks such as an index fund) and participating in the growth of the great minds and businesses of our county as well as other countries.
So, is NOW a good time to invest?
Well what was going on 5 years ago? We were in the middle of a 100 year pandemic with businesses across the country/world shutting down.
Would you have thought that was a good time to invest? Probably not.
At the time, 5 years ago the Total US Market was priced at $56. Today it's priced at $126. That is a 125% return on your money over 5 years. Said differently had you had $100,000 invested 5 years ago it would be worth $225,000 today.
Historical article · Originally published March 2025. Market data and tax rules reflect the original publication date. Past performance is not a guarantee of future results. Editorial and compliance review pending.