How Did Your Investment Portfolio Do in 2024? Changes To Consider for 2025
Written by
John Csiszar
Edited by
Cory Dudak
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The year 2024 was a strong one for the U.S. stock market. The S&P 500, one of the most widely followed broad stock market indexes, posted a gain of over 23%. This was on the heels of a 24.2% rise in 2023. But few investors — even professional ones — keep up with the returns of the S&P 500 over time. It’s likely that many individual investors did not snag these lofty returns. If you’re one of them, you might want to make some changes in 2025 to boost your earnings.
However, it’s important to remember that there are all kinds of investment goals, and the market indexes are not always the best barometer of “how well” you may have performed.
Here’s a look at how markets did in 2024, by a number of different metrics, and how you should be evaluating the performance of your own portfolio. Once you understand how you’re really doing, you’ll be in a good position to fine-tune your accounts in 2025 and get them situated in the best possible way to achieve your goals.
How the Major Market Indexes Performed in 2024
There are plenty of different ways to track the return of “the market.” While the S&P 500 is generally the most widely used, the Nasdaq, Dow Jones Industrial Average and Russell 2000 are also commonly cited.
- S&P 500: 23.3%
- Nasdaq: 28.6%
- Dow Jones: 12.88%
- Russell 2000: 10.0%
Obviously, if you’re an income investor that has no need for capital appreciation, trying to compare your portfolio of bonds to the return of the S&P 500 is worthless. A more appropriate comparison might be the Barclays Aggregate Bond Index, which returned 3.1% in 2024.
However, for many investors, comparing your returns to those of any individual index may not really matter all that much. What might make more sense is asking how well your portfolio met your personal investment objectives.
Did Your Portfolio Meet Your Needs?
If you’re retired and simply want to live off the income that your portfolio generates, comparing your return to that of the S&P 500 doesn’t make a lot of sense. While you may own some dividend-paying stocks, your portfolio is likely bond-heavy. So, if you earned, for example, 8% in 2024, that could have been a quite generous return for needs, even though the S&P 500 returned roughly triple that amount.
The bottom line is that regardless of the absolute return of your portfolio, you might not need to make any changes at all if it meets your investment objectives. If you earned enough income to satisfy your needs, that might be enough. If you generated enough growth from your portfolio but were still able to sleep at night, you may not need to try to outperform the market.
Changes To Consider Making
If you’re not satisfied with your returns, here are some of the changes you can consider making.
1. Buy a Low-Cost S&P 500 Index Fund
While index funds by definition provide an “average” return, that’s a return the majority of professional portfolio managers can’t beat on a long-term, consistent basis. So, for most investors, it’s a solid return. In fact, famed billionaire investor Warren Buffett has often recommended them. In a 2017 interview with CNBC’s Becky Quick, Buffett recommended that investors “Consistently buy an S&P 500 low-cost index fund. I think it’s the thing that makes the most sense practically all of the time.”
2. Dial Down Your Risk
If your portfolio generated huge gains — or huge losses — in 2024, it likely means you own risky, volatile assets. To help protect against sizable losses, and to help yourself sleep at night, consider reducing your risk in 2025.
While timing the market is never a good investment strategy, there’s nothing wrong with reducing risk and protecting gains. And after back-to-back 20%-plus gains in the S&P 500 — not to mention entering the historically weaker first year of the presidential cycle — it can be a worthwhile endeavor to protect yourself a bit.
3. Boost Your Income
If you’re an income investor but you feel like you came up short in 2024, consider broadening your asset options. For example, if you only own Treasuries or short-term bonds, consider other, higher-paying options. These could include everything from preferred stocks and closed-end income funds to dividend-paying stocks or even high-yield bonds, if you have a higher tolerance for risk.
Since the Fed is likely to cut interest rates more in 2025, be wary of holding too much money in a high-yield savings account. Rates on these accounts will drop in line with Fed rate cuts. But if you lock in a fixed rate now on a bond or CD, for example, you can keep your income higher as rates fall.
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