Markets in 2025 have shown once again that short-term thinking and overconfidence can lead to disappointment. Some areas have performed well, while others have fallen sharply. Yet many well-diversified portfolios have remained resilient. They did not avoid risk, they managed it wisely.
From my work with clients this year, three common mistakes continue to appear:
- Relying only on equities with no bond protection
- Focusing only on the US market and ignoring other regions
- Holding investments that do not match personal goals or risk tolerance
Read here what Partner from GSB Wealth, Mauro De Santis Bo had to say below.
Mistake 1: Holding only equities and ignoring bonds
Equities can offer growth over time, but they also bring volatility. This year has been a good example of that.
Chart 1: Portfolio and Bond Performance (Year to Date, 2025)
Source: FE fundinfo 2025 | Data from 31 December 2024 to 21 April 2025
YTD Returns:
- 100% Equity Portfolio: –5.35%
- 60/40 Balanced Portfolio: –0.75%
- iShares $ Treasury Bonds 1–3Y: +2.02%
- BlackRock USD Liquidity Fund: +1.33%
These numbers show the value of having fixed income in a portfolio. A fully equity-based portfolio is down over five percent. The diversified 60/40 option has held up much better. Meanwhile, bond funds have delivered small but positive returns.
Bonds are not just for income. They help preserve capital and reduce the emotional strain when markets fall. They give investors space to stay the course rather than panic and sell.
Mistake 2: Focusing Only on US Stocks
Many investors use the S&P 500 as a default benchmark. This year, that strategy has not worked in their favour.
Chart 2: Regional Equity Performance (Year to Date, 2025)
Source: FE fundinfo 2025 | Data from 31 December 2024 to 21 April 2025
YTD Returns:
- MSCI Europe: +11.60%
- MSCI Emerging Markets (EMEA): +7.27%
- MSCI World ex-USA: +6.96%
- S&P 500: –12.05%
This chart clearly shows that investors who limited themselves to the US missed strong returns elsewhere. Europe and emerging markets have been the strongest performers. The US market has been dragged down by a small group of overpriced tech stocks.
Leadership in markets changes over time. Diversifying across regions increases the chances of holding the right assets at the right time.
For more on how markets have responded to this year’s shocks, you may also want to read:
Mistake 3: Not matching your portfolio to your risk profile
One of the most worrying trends is investors being placed in portfolios that are too aggressive for their needs or preferences. This may feel fine during a bull market, but the problems start when volatility returns.
Common warning signs:
- Clients believe they can handle losses, but react emotionally when values drop
- Portfolios without bonds or liquidity funds are more stressful to manage
- Panic selling becomes more likely, and missed recoveries hurt long-term gains
A suitable portfolio should be built on:
- Your financial goals
- Your time horizon
- Your comfort with market swings
- Your ability to absorb loss
- How you behave during downturns
A mismatch in any of these areas can cause long-term damage. Bonds and cash-equivalent holdings are not just about performance. They help investors stay invested when others give up.
Final thoughts: Diversify with purpose
Diversification is not about owning a bit of everything. It is about building the right mix of assets based on your specific needs and timeline.
A well-diversified portfolio should:
- Balance growth with stability
- Include exposure to global markets
- Be tailored to your individual risk profile and investment goals
When markets rise, it is easy to believe you can handle more risk. But when things turn, those who have built their portfolio carefully are the ones who stay in control.
Planning ahead is always better than reacting too late.
Get in touch
Contact GSB today if you would like to discuss any of these matters with our in-house team.
Contact us
Disclaimer
This article is provided for informational purposes only and does not constitute financial, investment, legal, or tax advice. The views expressed are those of the author at the time of writing and may be subject to change without notice. While care has been taken to ensure the accuracy of the information provided, no responsibility is accepted for any errors or omissions. Past performance is not indicative of future results. All investments carry risk, including the potential loss of capital. You should seek professional advice before making any investment decisions.
Performance data referenced in this article has been sourced from FE Analytics as of the 28th of April 2025.
GSB Capital Ltd is authorised and regulated by the Dubai Financial Services Authority (DFSA), licence number F006321 – intended for general public.