The new year is officially here, which means it’s an exciting time of year for investing researchers.
The new portfolio data has arrived!
All of the namesake Portfolios and Charts here at Portfolio Charts now have preliminary updated numbers through the end of 2025. Collecting data from so many government sources takes a bit of time and everything won’t be final for another month or so, but there’s enough “close-enough” data that there’s no reason to delay. Be sure to check in on the asset allocation you have been eyeing, as it was a pretty remarkable year in a lot of ways.
To ring in the new year, I always like to look back at the portfolio performance rankings over the previous year. It’s not so much to chase recent performance, but simply to see what we can learn about asset allocation in general. And there were a few notable lessons! So let’s kick off the new year with a quick discussion of what we can learn from the best portfolios in 2025.
2025 Portfolio Rankings
Jumping right into the numbers, here are all of the portfolios I track ranked by their real return in the United States in 2025.
2025 was a very good year for all portfolios, but five definitely stood out: the Weird Portfolio, Permanent Portfolio, Golden Butterfly, Pinwheel Portfolio, and Golden Ratio Portfolio.
The common theme of all these portfolios will be no surprise to anyone paying attention to the markets this year. They all contain sizable allocations to gold, and gold achieved an attention-grabbing 63% real return in 2025. So yeah. There’s a reason I chose a gold medal as the title image, as the classic precious metal cherished for millenia was again where the action was last year.
So should we all stop here and load up on gold bullion to get rich?
The simple answer is absolutely not. There’s so much more to investing than just chasing the asset with the best recent returns, no matter if it’s gold last year or stocks the next. So while it may be tempting to attribute the entire story to the performance of a single asset and call it a day, allow me to point out a few more takeaways I find interesting.
Takeaways From a Red-Hot Asset
Look past the one obvious driver of returns for certain portfolios this past year, and the focus changes from reactionary behavior for proactive principles. But the story in 2025 certainly begins with gold. So let’s start right there and tackle it head-on.
There’s more to investing than expected returns
If I had a nickel for every time someone dismissed the idea of gold helping a portfolio because “the expected return is zero”, I could buy a Golden Eagle by now. It’s a very common argument by gold skeptics with just enough education in asset pricing theory to make what feels like definitive statements, yet here we are. Up 63% in a single year with no sign of letting up.
2025 is the type of year that makes asset theorists shrug away the market as a bunch of greater fools while normal people watching the action scratch their heads. In fact, both sets of people might be surprised to learn that since 1970, the average real return of gold bullion was not zero, but a healthy 7.3%. And the annual real return has not even remained within +/-10% of zero more than 40% of the time. So more often than not, the return is nowhere near zero.
For reference, the average real return for Developed World Stocks over the same timeframe was a nearly identical 7.4%. Two global assets with similar long-term average returns, but depending on who you ask only one is “expected”.
So does this mean that I think asset pricing theory is bogus? Of course not! It’s taught in business schools for good reason. You can even see the difference in distribution in the two charts, where stocks had a notably greater chance of posting a gain (71%) than gold (56%). My point is simply that sometimes the gap between academic theory and actionable reality is a little wider than people realize.
When it comes specifically to gold, I believe that smart people trained to closely evaluate companies based on fundamentals can be tempted to shoehorn the same valuation frameworks to things like precious metals where they don’t necessarily apply. Just sayin’ — If your expected returns prediction for gold truly never changes even when it’s up 63% in a year, maybe it’s time to reevaluate the utility of the model.
In any case, please don’t get me wrong. I have zero issues with investors who dislike gold for any reason and prefer to avoid it with their own money. There are lots of awesome portfolios above that include no gold at all. I just believe that the platitude “the expected return of gold is zero” often does more harm than good by shutting down constructive discussion about wider portfolio theory. Depending on your approach, there’s more to asset allocation than blindly stacking individual assets with high expected returns.
Not all portfolios with gold did as well
Stepping off my gold-plated soapbox and getting back to the portfolio data, another thing worth noting is that owning gold was not a catch-all free pass to top performance. The All Seasons and Global Market portfolios both hold gold as well. But they finished 15th and 12th, respectively.
The 2% allocation to gold in the Global Market Portfolio clearly didn’t particularly move the needle, which makes perfect sense. A sky-high 63% gain of a tiny 2% allocation only results in a portfolio gain of a modest 1.26%. For people who like to tinker with small allocations to individual companies or assets, take some time to really think about this example. How much do you really think it is helping?
The 7.5% allocation to gold in the All Seasons Portfolio is not that different than the 10% in the Pinwheel Portfolio, so the explanation for the difference in outcomes may be a little less obvious. We’ll get that that momentarily, but first let’s look at one more gold datapoint.
The top portfolio didn’t have the most gold
For anyone tempted to just pin the portfolio rankings purely on luck with loading up on the top-performing asset, you might assume that the portfolio with the most gold surely performed the best. What if I told you that’s not the case?
With a hefty 25% allocation to gold, the Permanent Portfolio has never been shy about its bullion holdings. And while it did perform very well this year, it still managed only the 2nd place finish behind the Weird Portfolio that holds 20% gold. Surprised?
If you’re looking to maximize returns within a portfolio, your first instinct may be to just push more chips into the top returning asset. Unless you’re lucky enough to guess correctly on a single winning bet, it actually may not work out quite as well as you expected. In this case, the Weird Portfolio’s allocation to international small cap blend stocks also did extremely well in 2025 with a 35% return of its own, nearly doubling the return of US large caps.
Your choice of diversification still matters, and doing well with multiple investments can outperform doing great in just one.
The World Is a Big Place
While lots of people talk at a surface level about diversification, this is the point where I think most portfolio analysis falls short. Whether it’s caused by a feeling of US exceptionalism or simply a terminal case of data availability bias, a lot of portfolio researchers have no real global context to judge their investing ideas against. And the world is a big place.
Despite the excellent numbers, what if I told you that US asset returns were only ordinary in 2025 compared to other options? In a year full of positive stock news and countless headlines about AI advances driving rapid growth in the top US companies, that may sound like a wild take.
For people not familiar with Portfolio Charts, I compile way more data outside of the US than most. That’s why my annual updates take a little while to complete, but it’s also a major boon for articles like this. Here are the 2025 nominal returns (expressed in USD) for all 71 assets I currently track. You may have to scroll a bit!
The asset codes on the left are in two parts. The first is the market, and the second is the asset. So ESP-LCB means large cap blend in Spain.
You know it’s a good year when only a single asset globally posted a negative return (sorry, Japanese bond investors). Within this list, I marked US large cap blend stocks and intermediate US treasury bonds in orange. Now you can see what I mean by ordinary.
The top performing asset in the world last year was not even gold. I’m looking at you, large cap blend Spanish stocks! But the real story here is not at the high end, but a very important detail lurking in the weeds.
Find the orange USA-LCB bar for US stocks. Now look at the pack of European bills (just think of them as cash) in its vicinity. How can a hot US stock market still be just barely beating out cash in Europe and falling well behind cash in Sweden?
The answer is exchange rates. And they’re critical for understanding how international investing works.
Exchange rates affect portfolio returns
Every currency in the world has an inherent market value, and the value of a dollar, euro, or krona changes all the time. The relative difference in currency values is defined by the exchange rates. And exchange rates are quite volatile.
Here’s an old chart that illustrates what that currency volatility looks like. If these exchange rates were an asset, they’d be way more similar to stocks than to cash.
The interesting thing that happened under the market hood in 2025 is that the value of the dollar fell quite a bit relative to other currencies. The Euro rose about 13.4% relative to the US dollar, while the Swedish Krona jumped by 20%. So even with nominal returns in the low single digits for local treasury bill investors in those countries, the return in USD was boosted by the amount of this change in exchange rates. That’s where the crazy high return for foreign cash is coming from. You could receive significantly more USD for every unit of foreign currency in 2025 than at the same time in 2024.
The important point to remember is that exchange rates affect far more than just cash. They also affect foreign stocks and bonds. That’s why every class of Developed World stocks performed better than US large cap blend, and also why ex-US stocks (especially value variants) finished way higher on the list. Give an asset a double-digit head start due to exchange rates, and it’s really hard to keep up.
So circling back to our previous examples of the Pinwheel Portfolio compared to the All Seasons Portfolio and the and Weird Portfolio compared to the Permanent Portfolio, this advantageous year in foreign exchange rates largely explains the initial unintuitive performance. Neither the All Seasons Portfolio nor the Permanent Portfolio invest internationally, so this year they were competing with a handicap.
Now this isn’t to say that exchange rates will always work in your favor. Look at the above chart again, and you can clearly see that they can swing sharply the other direction as well. But if you’re truly interested in diversification, investing in foreign markets is about more than just diversifying different stocks and bonds. It’s also about diversifying currencies. And through the constructive process of periodic rebalancing, this can help a portfolio in the long run as well.
Portfolio rankings in Euro
To build on that idea, I want to return to our original chart and reframe it entirely. Instead of using the default US currency and inflation, here’s what the top portfolios in 2025 looked like from the perspective of a German investor.
The first obvious difference is that the top portfolio in 2025 was not a diversified asset allocation at all but a simple portfolio of 100% German stocks. If you get lucky with a concentrated bet, sometimes good things happen! Perhaps there is an investor out there with 100% gold feeling like a genius, too. We’ll see how long that lasts.
It’s still notable that 3 of the top 5 portfolios in Germany are heavy on the gold allocation. Clearly that helped everyone this year. The Weird Portfolio took a major tumble, which also makes sense when you realize that the foreign holdings (including REITs which are exclusively based on US data) worked against it. Just as the exchange rates boosted international investments for US investors in 2025, they depressed the returns for investors elsewhere where the large US market is international.
You can also see the effect of exchange rates on the absolute return of every portfolio. Look how much lower the columns are in general for German investors. Currency cuts both ways.
Universal Conclusions
So we’ve talked about annual portfolio data, the limits of expected returns, broad asset performance differences, and the effect of exchange rates. Add it all up, and there’s a good chance you’re actually a little more confused than when we started. When it comes even to simple things like ranking portfolio performance, it’s not always so straightforward.
So rather than settle on one portfolio to celebrate, I think it’s more valuable to discuss a few universal lessons.
- If your natural investing personality type biases you towards a certain perspective that prevents you from understanding how the underlying returns even work — like, for example, putting a flat 0% return into your permanent gold assumptions — then perhaps take 2025 as your cue to read about new ideas. I’m not telling you to invest in gold or any other asset you dislike or just don’t understand. Just have an open mind and expand your opportunity space. You may like what you find.
- Next, stop thinking about portfolios solely using US data. If you live in Europe and are reading sources in the US, the conclusions very well may not apply to you. And if you live in the US, studying data from the perspective of investors in other countries can help prepare you for a future year when the “ideal” portfolio may look a lot different for reasons not accounted for in your current thought process. With 71 unique assets and returns translated to a dozen different countries, Portfolio Charts offers tons of data to help with this!
- And finally, don’t get too hung up on investing your money in whatever did the best last year. The rankings will change all the time, and they’re not even consistent between country perspectives in the same year. Instead, seek out a portfolio that meets your financial needs and does consistently well every year. Optimize for max returns and you’re begging for disappointment. But optimize for consistency and you’ll never be let down.
2025 was a great year for a lot of portfolios. Make 2026 the year you get serious about your own portfolio, and you’ll look back this time next year with a great sense of accomplishment no matter where it ends up.
Happy New Year!
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