If you’ve read any of our investment insights or our approach to investing on our website (RSWA – Investment Management), it will come as no surprise that we are strong proponents of diversification in client portfolios. We believe diversification helps reduce risk and volatility, giving clients the best opportunity to achieve their financial goals.
While the benefits of diversification are significant, it does come with one drawback – you are always owning something you hate. Being diversified means holding asset classes that perform differently across market environments. Rarely does everything in a portfolio move in the same positive direction at once. That said, 2025 is shaping up to be an exception.
The chart above compares the return of each major asset class for 2025 so far with their 10-year and 20-year average returns ending December 31, 2024. As the table shows, each asset class is handily outperforming its recent historical averages.
Diversification also proved its value earlier this year during a much rougher market environment. As of April 9, the S&P 500 was down 15% from its starting point on January 1. Conversely, international stocks were down just 3.5% at that time, and bonds were up nearly 2%. An investor holding only large U.S. stocks would have been down 15%. An investor with 80% U.S. stocks and 20% international stocks fared slightly better, down around 12.7%. Meanwhile, an investor holding a mix of 60% stocks (48% U.S. and 12% international) and 40% bonds was essentially flat, down just 0.05%. This demonstrates that diversification not only provided strong returns in 2025 but also offered critical protection when the market turned challenging.
2026 Tax Brackets Announced
The IRS has released the federal income tax brackets and standard deductions for 2026, reflecting inflation adjustments. Here are a few notable figures and updates:
- Inflation adjustments: Lowest two tax brackets rise by 4%, higher brackets by 2.3%
- Standard deductions: $16,100 for individuals, $32,200 for married couples filing jointly
- Estate-tax exemption: Increases to $15 million, up from $13.99 million in 2025
- 0% capital gains tax rate thresholds: Singles with taxable income up to $49,450; joint filers up to $98,900 CNBC WSJ
Chart of the Week:
Perhaps the return figure that jumped out most in the table above was the year-to-date return of gold. Since the start of the year, the precious metal is up over 57%. While investors in gold have been handsomely rewarded this year, historically, gold investors have had to be very patient.
Over the past 50 years, the price of gold has gone through major swings — periods of sharp increases followed by years (or even decades) of poor performance. An investor’s experience and return is significantly different depending on their investment timing. Take these three start points and timeframes as an example:
- January 1980: An investor would have waited 25 years (until December 2005) just to break even.
- January 2001: A golden decade, delivering 16.34% annualized returns through 2012.
- January 2013: Much slower growth, averaging just 1.34% annualized returns through 2023.
This boom-and-bust nature of gold is why you don’t hear us talk about it often. Our investment philosophy is built around the long term, and timing when gold will be in favor is nearly impossible. While holding it for the long run can be rewarding, it requires an extraordinary amount of patience and perhaps a little luck at the end of the rainbow.
Financial Planning Corner:
Required Minimum Distributions
As the year winds down, it’s a good time to review your retirement accounts and make sure your required minimum distributions (RMDs) are completed. RMDs are the minimum amounts you must withdraw from certain retirement accounts each year. If you were born between 1951 and 1959, RMDs must begin at age 73; if you were born in 1960 or later, they must begin at age 75. Even if you don’t need the extra income, the IRS still requires these withdrawals, so planning ahead can help you avoid unnecessary taxes or penalties.
If you’re looking for a way to make your RMDs more meaningful, consider a Qualified Charitable Distribution (QCD). With a QCD, you can direct your RMDs straight to a qualified charity, lowering your taxable income while supporting causes that matter to you. It’s a simple strategy that benefits both you and the organizations you care about, making year-end planning a little easier and a lot more impactful. Even better, you can start making QCDs as early as age 70.5, well before RMDs are required, giving you more time to give back and manage your tax picture strategically. RSWA - Using an IRA QCD: Consider Giving Your IRA RMD to Charity
Quick Hits:
- New Englanders love fall, but so does everyone else — and that’s the problem. WSJ – New Englanders Are Fed Up With Leaf-Peeping Tourists Ruining Their Fall
- Here is a one-stop site for Halloween events throughout New England: HalloweenNewEngland
- Americans are set to spend $3.9 billion on Halloween treats USA Today
- So, where is your portion of that $3.9 billion going? Here is a ranking of the best Halloween candy The Cut
- We exercise and train our bodies — so why not our brains? Mental fitness looks a lot like physical fitness Sports Illustrated
A Runner’s Guide to Investing: Lifetime Miles
Runners have a term called “lifetime miles.” IRunFar I like to think of it as similar to compounding interest in investing. Each mile you run during training builds on months and years of prior effort, just as current investment returns built on the gains earned in years past. In both cases, risk and reward are always in balance.
For runners, lifetime miles create a solid foundation to grow from, but there are limits to what the body can handle. You can train hard to accelerate your fitness, but that also increases the risk of injury or burnout. Those gains become meaningless if you’re sidelined when it matters most. A steady mix of challenging training and proper rest and recovery leads to the best long-term results.
In investing, it’s much the same. Compounding works wonders over time, but a sudden market correction can quickly erase years of progress. When that correction coincides with the need to draw income, those past returns can lose their benefit. Maintaining a balanced mix of stocks for long-term growth and bonds and cash for stability and income tends to produce the strongest long-term results.
Quote: “Success is the sum of small efforts, repeated day in and day out.” — Robert Collier
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