8 lessons for investors from 2025
December 21, 2025
Sam Ro · Contributor
5 min read
A version of this post first appeared on TKer.co
A lot happened in 2025.
While it may be difficult to list every major event of the year, hopefully we’ll at least be able to remember the lessons learned from them. Specifically, the investing lessons applicable to the future as we try to make sense of the market’s moves and the news driving them.
Here are some of the lessons TKer learned (or relearned) this year.
When I met with my accountant in February, I learned I had some room to lower my taxable income. One action I took was contributing more to my self-employed 401(k) plan. Wasting no time, I transferred some cash to that account, and on Feb. 18, I added to my S&P 500 index fund position.
The very next day, the stock market topped and proceeded to fall 20% before bottoming on April 8.
It’s okay. Things appear to be working out. The S&P is up 10% since that purchase. It’s a reminder that the market favors those who can put in the time.
There’s a lot of turnover in the S&P 500. The index regularly drops companies and replaces them with up-and-comers.
But the pace of this turnover has been picking up.
From BofA: “The growing impact of disruptive companies can have downstream effects on incumbent companies. Roughly a third of the S&P 500 has been replaced since 2015. In 1958, the average seven-year rolling lifespan of a company on the S&P 500 was 61 years. By the 1980s, it had dropped to 30 years, by 2016 it was 24 years, and by 2021 it was 16 years. If we continue on this road, by 2027, companies could last just 12 years as they become increasingly disrupted.”
Whether it’s strategists’ bullishness, market concentration, the strength of the dollar, rate cuts, price-earnings (P/E) ratios, or the past year’s price performance, there seems to be no single indicator that offers a consistent signal for what the market will return in the near term. Read more here.
That’s why in their research, analysts often employ the most important Latin phrase in investing: Ceteris paribus. Read more here.
We’ve discussed exhaustively how difficult it is to pick stocks that outperform the market. But let’s assume you were able to identify these winning stocks. Is it smooth sailing from there as you smoke the competition? No. Far from it.
Morgan Stanley’s Michael Mauboussin and Dan Callahan studied the price behavior of 6,500 stocks, including the 20 stocks with the best total shareholder returns over the 40-year period from 1985 to 2024. Even those best stocks were wildly volatile for their investors.
“The median maximum drawdown was 72% for the best group, and the median maximum drawdown duration, the time from peak to trough, was 2.9 years,” they found. “The median time to return to the prior peak was 4.3 years. The median annualized abnormal returns following the bottom was 8% for the next 5 years and 12% for the next 10 years. This is based on the unrealistic assumption the stock was purchased at the low.”
Valuations are currently hovering near five-year highs. This is notable because, historically, a stock market trading at above-average valuations tends to generate weak returns in the years to follow.
But not always.
Ten years ago, the cyclically adjusted price-earnings ratios predicted we’d get low single-digit returns. Instead, we saw double-digit returns. Read more here. »
Five years ago, the next 12-month forward P/E ratio was historically high at 23.6x. The S&P 500 has nearly doubled since then. Read more here. »
Even sophisticated Wall Street research operations have been getting this wrong. Read more here.
The economy continued its years-long trend of slowing in 2025. Meanwhile, the stock market has rallied, and it currently trades near record highs. Read more here. »
Perhaps the stock market is anticipating a brighter future than what the economy may be signaling about the present. Read more here.
It all speaks to TKer Stock Market Truth No. 10: The stock market is and isn’t the economy.
The economy may not be working for everyone right now, but it’s at least working for stock market investors. Keep this in mind as you read potential news stories in 2026 about the financial pain that some people may be going through. Read more here. »
As I often say, earnings and expectations for earnings are the most important long-term drivers of stock prices.
In fact, this view was linked to in The New York Times’ feature, “14 Charts That Explain 2025.”
This is the simplest explanation for why the stock market has roared higher this year. Read more here.
The average annual return in the S&P 500 is about 10%. I don’t know what kind of year 2026 will be, but don’t expect it to be perfectly average, which is actually a rare occurrence.
Importantly, in positive years, the market returns about 20%. From this perspective, the impressive returns in 2023, 2024, and 2025 aren’t all that extraordinary. Read more here.
So as we go into the new year, we should manage our expectations. Because history suggests it’s unlikely to be average. Read more here. »
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