This investment had the best returns in 2025. And there’s another big opportunity many missed

Monday, 12 January 2026

Few would have predicted this to be the best investment of 2025.

“I haven't found anyone in my 22 years in the industry who has the ability to predict with any accuracy or consistency where the market's going next. Some people get lucky, but they can't do it again and again.'

This unapologetic honesty comes from Mark Lister, the Investment Director at Craigs Investment Partners.

The point he makes is that no one can say with any great certainty what the market is going to do in the next year or two – attempting to do so is a folly, which we simply shouldn’t participate in.

“You're sort of a mug, in my opinion, if you try that,” he says.

“I think we're much better off to just take that long-term view, and go play golf or go to the beach.'

Lister made these comments to me when I asked him about a graph he recently shared showing the performance of different investment types over the course of 2025.

Outperforming every other category, including US shares, New Zealand-listed property and European shares, was gold, which clocked in growth of 58.1% over the course of those 12 months.

Guessing which categories will perform well is never easy.

We were also given a stern reminder that the investments that get all the attention aren’t always the ones that perform best.

Despite all the hype about AI, US shares grew only 14.6%, well below other markets. And Bitcoin came in as the worst performer across the main categories, sliding 10.2%.

“Last year, you were much better off in emerging market stocks, European stocks, Japanese stocks or gold, says Lister.

“Not many people would have guessed that some of those other share markets actually outpace the US.'

The risk of attempting to pick a winner became even more apparent when you start to look at the performance of individual stocks.

“The Magnificent Seven are often seen as the star performing cohort, but only two stocks of those seven outperformed the S&P 500 last year [2025]. The other five were behind. Only Google and Nvidia came in ahead.'

Listening to hype, noise or recommendations from your buddy on Reddit will not necessarily lead to making smart choices when it comes to investments.

“You can’t just go with what’s hot, with what’s in the headlines, with what your mate down the road is buying, because you never know sort of which region will do well.'

The missed opportunity

Mark Lister doesn’t believe anyone has the ability to predict what the market is going to do from one year to the next.

Goldman Sachs research from 2025 showed that 20% of New Zealand investment portfolios are assigned to international equities outside the United States.

Meanwhile, investments in the US-based shares make up 27% of our investment allocation.

We also have what’s called a significant home bias, which sees 53% of our investment allocation dedicated to the domestic share market.

Look again at the graph shared by Lister, and two things become evident: our portfolios often aren’t as diversified as we think; and secondly, we are missing out on some of the gains happening in other markets.

European markets, UK markets and emerging markets all had stellar years that we would have had limited exposure to.

Of course, every investor needs to spread their risk in a way that they’re comfortable with, but geographic diversification is also important in terms of spreading risk beyond the fortunes of a single country – particularly at a time when geopolitics feels so fraught.

The folly of trying to time the market

In much the same way that it’s difficult to pick which categories of shares will do well, it’s equally difficult to time when something will either go up or down.

Doing nothing with your investments is often a better approach than trying to time the market.

A graph shared by Pie Funds chief client officer James Paterson shows the cost of getting your timing wrong when it comes to investments.

If you panic-sell and end up missing the 10 best days on the market, your potential returns will be more than halved.

Alternatively, if you’re a clairvoyant and you’re able to exclude the 10 worst days, your returns would more than double.

Fisher Funds’ Harry Smith argues there are too many variables that have to align to make it possible to time the market.

But here’s the catch: the ten best days are quite often very closely related to the ten worst days.

Harry Smith, a portfolio manager of international equities at Fisher Funds, points to JPMorgan data showing that over the last 20 years, seven of the market’s 10 best days occurred within two weeks of the 10 worst days.

“For example, in 2020, markets saw their second-worst day of the year on March 12 at the onset of the Covid pandemic. The next day, the markets saw their second-best day of the year.”

What this means is that you’d not only need to guess exactly when the market is going to drop, but you’d also need to then guess exactly when it’s set to rise again. If you get either side wrong, the mistake would just end up cancelling any gains you would have made on the other side.

Smith adds the complexity of timing a market is ramped up even further because not only do you have predict a major market-moving event, you also need predict what other investors are going to do. Markets tend to move most signficantly when there’s a big shift in buying or selling volumes.

It’s also worth considering that bad news is sometimes already priced in, which can cause markets to rise when you’d expect them to fall.

Dean Anderson argues that predicting markets requires a superhuman ability to predict world events.

“That is four things to get consistently right to generate healthy returns,” says Smith. “Even before considering random or unforeseeable shocks like Covid, this makes it an almost impossible feat.”

Defence against follies and concentration

Dean Anderson, the founder of Kernel Wealth, describes trying to time the market as “a losing game”.

“Because markets trend upward over the long term, the most effective strategy for investors over a seven- to 10-year horizon is simply to remain invested and let compounding do the heavy lifting,” Anderson says.

“Attempting to predict short-term bumps is pure crystal ball gazing – and in a world where a single global event or tweet can shift sentiment in hours, it’s more about luck than logic.”

As a case in point, Anderson notes that even though US President Donald Trump’s recent operation in Venezuela didn’t move the market, it’s the kind of thing that nobody except a few insiders could have seen coming.

Anderson points to index funds as an excellent core for any portfolio.

“They provide the essential foundations of low fees, tax efficiency, and broad diversification. Once that core is established, your success is largely down to managing your own emotions and resisting the urge to panic-sell during volatility.”

But this doesn’t mean index funds are the be-all and end-all of investing.

“You can add satellite investments like alternative assets or single stocks to potentially juice your returns, but having the comfort knowing that if one of them failed, your entire financial future isn't at risk.”

The key takeaway here is that you are far better off biding your time and letting the market rise and fall as it always does. Your two best defences against the fear of losing money are time in the market and making sure that your portfolio is diversified beyond one stock or a single geographic location.

Many people imagine themselves smart enough to beat the market, but few (if any) actually are.