6 timeless investing lessons for 2025

As 2024 draws to a close, I’ve been reflecting on the enduring lessons of wealth building. It's remarkable how, despite the pace at which technology advances, the core principles of wealth management continue to stand the test of time, rooted deeply in decades of market history and financial wisdom. 

In this month's letter, I want to revisit some of the insights we’ve explored together – from the power of market efficiency to the art of diversification. As we look forward to 2025, these time-tested principles remain as relevant as ever – offering us both a reflection on our journey, and a foundation for the future.

1. Bet on market efficiency, not news headlines

Markets are inherently efficient in the long run. While sensationalist headlines can drive short-term volatility, history has shown time and again that markets ultimately reflect economic fundamentals. Through events like the dot-com bubble, the 2008 global financial crisis, and the COVID-19 pandemic, patient investors have been rewarded by staying invested for the long haul. The key is to not get swayed by the volatility of the moment but focus on the long-term potential of your investments.

2. Take lessons from the ultra-rich

The ultra-wealthy have mastered the art of generational wealth building, focusing on preservation and long-term growth. Their portfolios typically combine liquid and illiquid investments, and blend traditional investments with alternative assets. By thinking beyond the immediate term and leveraging on genuine diversification, they position themselves to ride out market volatility and benefit from sustained growth.

3. Market cycles are natural, embrace the dips

History has taught us that booms, busts, corrections, and recoveries follow a natural rhythm. While volatility is an unavoidable part of investing, understanding your risk tolerance helps ensure you can stay invested through market cycles. In fact, savvy investors see market corrections as opportunities to buy at a discount, understanding that time in the market consistently outperforms timing the market. The most successful investors don't try to predict market cycles – they prepare for them.

4. Allocate for the bigger picture

Asset allocation isn't just about picking investments – it's about understanding how different assets work together across varying economic conditions. A well-constructed portfolio of equities, bonds, real estate, and alternative investments considers not just just the individual merits of each investment, but how they complement each other. Strategic asset allocation protects against concentration risk while positioning for growth across different market environments.

5. Don’t let biases drive your decisions

Our personal biases – whether optimism, loss aversion, or confirmation bias – can cloud judgment and lead to suboptimal decisions. The history of investing is littered with examples of people following trends without real analysis, whether that was in the dot-com boom or the housing bubble of 2008. The key to managing biases isn't to eliminate them (after all, they're part of human nature) but to recognise and manage them. This might mean automating regular investments or working with advisors who can provide objective perspectives.

6. Build with time-tested principles

Throughout history, various investment fads have come and gone – from the 19th-century California Gold Rush or the 20th-century dot-com craze. While these trends may offer short-term gains, they more often end in disappointment, especially if they’re driven more by hype than value. The most successful investors instead focus on the fundamentals.

The first is maybe the most enduring: diversification. Whether through a mix of stocks, bonds, real estate, or alternative assets, investing across asset classes reduces risk and enhances returns.

The second is investing's most powerful force: compounding. Alongside a diversified portfolio, compounding can grow your wealth exponentially. Consider this: $1,800 monthly contributions to an initial $10,000 grows to almost $1.1 million in 18 years, assuming 10% annual returns. This isn't just mathematics – it's the power to create generational wealth.

Moving forward into 2025

Markets will present both challenges and opportunities over the next year – as they always do – but staying grounded in these fundamentals will keep us better prepared for whatever lies ahead. Whether a novice investor or a seasoned one, history provides a roadmap for successfully building and preserving wealth over the long term.