The biggest investment lesson of 2025

There were plenty of lessons for investors in 2025, as is the case every time we close the book on a calendar year.

The one that stood out for me was the need to ensure your investments were globally diversified.

If you didn’t do that and instead hunkered down in New Zealand assets, you didn’t enjoy the success you could’ve.

Sadly, this is eerily similar to my “biggest investment lesson of 2024”.

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The local sharemarket had a lacklustre year, with the NZX 50 index returning 3.3 per cent in 2025.

That’s well below the long-term average, despite it being the second-best performance since 2020.

Domestic fixed income was much better, with the NZX Corporate Bond Index up 5.5 per cent.

That’s very solid from a conservative, lower volatility asset class.

The property market was as uninspiring as the sharemarket, with national house prices falling marginally last year.

If you left your hard-earned dough sitting safely in the bank, the return from cash in 2025 was 3.6 per cent.

Having said that, after tax off you’re in the twos, which below the official inflation rate of 3.1 per cent (so maybe not so safe after all).

Apart from local fixed income, those returns are disappointing across the board and they look much worse if compared with international assets.

World shares were up very strongly last year, and contrary to popular belief it wasn’t all about the US market and its superstar tech sector.

The US did have a stellar year, with the S&P 500 index rising 17.9 per cent, its seventh 15 per cent plus annual return of the past nine years.

However, other markets were even better.

Emerging market equities surged 34.4 percent, Japan was up 25.0 per cent and the boring old UK sharemarket rallied 25.8 per cent (its best year in 16!).

Europe also edged out America, with a 20.4 per cent gain.

All those sharemarket returns include dividends, just like the NZX 50.

US Treasury bonds were solid (returning 6.3 per cent), while precious metals left everyone in the dust.

Gold rose 65 per cent and silver surged almost 150 per cent, the strongest performances since 1979.

There are some big numbers within that group, especially for a mere 12 months.

When you account for currency moves, there are some swings and roundabouts.

The NZ dollar rose 2.9 per cent against the US dollar, although at current levels we’re still well below the long-term average of about US$0.65 against the greenback.

That was a headwind to returns from US assets, and it reduced the S&P 500 gain to 14.5 per cent.

It was a similar story against Japan, where we rose against the yen and reduced our currency-adjusted return to a still-healthy 21.7 per cent.

We moved in the other direction against the euro, British pound and the Australian dollar.

That’s unhelpful for anyone planning a trip to those parts of the world, but it boosted our NZ dollar returns significantly from all those regions.

European shares jump to a table-topping 32.8 per cent, the UK to 31.6 and the Australian market pushes further into double digits with 15.6 per cent.

The NZX 50 was up just 3.3 per cent remember, and house prices flat.

Whether it’s houses or shares that spin your wheels as an investor, the lesson is the same.

If you had too much of your capital in local assets, you did yourself a disservice.

A big one.

New Zealand won’t always be a laggard.

After all, in the decade leading up to the pandemic local shares outperformed international markets on seven out of ten occasions.

However, we’ve fallen behind since then as our economy has struggled more than most.

As workers, homeowners and small business owners, there’s not much we can do but stick it out and wait for things to improve.

Let’s hope that happens in 2026.

However, investors don’t face those same constraints and it’s never been cheaper or easier to spread your wealth across greener pastures.

The NZX 50 is up 17.9 per cent since the end of 2019, while house prices are 23.6 per cent higher.

That sounds reasonable when put like that, but the per annum returns (of 2.8 and 3.6 per cent) are much less inspiring.

Inflation is up 26.3 per cent (or 4.2 per cent annually) over that period, so you’re actually poorer if that’s where you’ve been invested.

Meanwhile, world shares have doubled in value, or gained 12.5 per cent annually since then.

If you’ve been hunkered down in New Zealand assets in recent years, the returns you’ve needlessly left on the table are significant.

We live in a great country and there’s a more prosperous period ahead for us, but there’s no need to be “all in”, or anything close to it. The mobility of your capital means the world is your oyster and investors should take advantage of that.

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