Andrew Shilling at MarketWatch reported that broadly diversified portfolios beat the classic 60/40 mix by five percentage points last year, the widest margin since 2009, with gold up more than 60% and international stocks leading. He asked how investors should react.
My first caution: I would not build a strategy around one calendar year. Diversification had a great run because the things that lagged for a decade finally led. That is what it is supposed to do. It is not a signal to chase.
What that year tells me is that complexity has to earn its seat at the table. A more diversified portfolio is not automatically better. Every sleeve added beyond a simple stock and bond mix should have a reason: lower correlation, a specific risk it hedges, a valuation case. If it cannot justify itself, it is just more to rebalance.
That said, my portfolios have been moving. Value stocks are already showing up in the portfolios I manage, partly as a correction to the mega-cap concentration that defined the 2021 to 2024 run. I am actively adding international equities for most clients, not because I have given up on U.S. markets, but because the valuation gap has not been this wide in decades. And gold serves a specific purpose: portfolio insurance. Small, deliberate, and not sized by last year's return.
Diversification worked. The lesson is to have it before it works, not after.
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