2025 Was a Year of Surprises for Retirement Savers – Here’s What You Need to Know
Last year, the financial markets delivered a solid performance across the board, with U.S. equities, international stocks, and bonds all ending in positive territory. But here’s where it gets interesting: my Model Retirement Saver Portfolios, designed for those still working and saving for retirement, saw double-digit gains in 2025, thanks to their significant allocation to stocks (ranging from 50% to 95%). The real standout? International stocks led the charge, marking a dramatic shift from 2023 and 2024, when they struggled to keep up with the soaring U.S. market. And this is the part most people miss: mutual fund portfolios outperformed their all-ETF counterparts by convincing margins in 2025, after lagging behind in the previous two years.
Primecap Odyssey Growth, a key player in all three mutual fund portfolios, was the driving force behind this success. Its low-turnover strategy paid off, with strong gains in technology, healthcare, and industrials. But here’s a controversial take: despite its impressive 2025 performance, Morningstar downgraded its Medalist Rating mid-year. Does this mean the fund’s glory days are behind it, or is it still a solid long-term bet? Let’s discuss in the comments.
To put these portfolios to the test, I compared their returns against a blended benchmark of inexpensive index funds and ETFs. The results were mixed: while mutual fund portfolios outperformed their benchmarks, ETF portfolios lagged. This raises a thought-provoking question: is simplicity the ultimate strategy? For those who prefer a no-frills approach, I’ve created minimalist versions of these portfolios, focusing solely on core index funds or ETFs. Check them out here.
Recognizing that not all retirement accounts are tax-sheltered, I’ve also developed tax-efficient versions of these portfolios, available for both mutual fund here and ETF here investors.
Mutual Fund Saver Portfolios (Full details: here)
Aggressive Mutual Fund Saver Portfolio
Moderate Mutual Fund Saver Portfolio
- 12% Primecap Odyssey Growth
- 13% Oakmark Fund
- 13% Vanguard Dividend Appreciation Index VDADX
- 10% Vanguard Extended Market Index
- 27% Vanguard Total International Stock Index
- 5% Oakmark International Small Cap
- 20% TCW MetWest Total Return Bond
- 2025 Return: 20.45%
Conservative Mutual Fund Saver Portfolio
- 10% Primecap Odyssey Growth
- 10% Oakmark Fund
- 10% Vanguard Dividend Appreciation Index
- 5% Vanguard Extended Market Index
- 10% Vanguard Total International Stock Index
- 5% Oakmark International Small Cap
- 30% TCW MetWest Total Return Bond
- 10% Fidelity Short-Term Bond FSHBX
- 10% Vanguard Short-Term Inflation-Protected Securities Index VTAPX
- 2025 Return: 14.81%
Performance Highlights:
Primecap Odyssey Growth was the undisputed champion in 2025, outperforming the broad U.S. market by a wide margin and landing in the top 1% of large-blend funds. This helped offset its underwhelming performance over the past decade. Meanwhile, the portfolios’ international stock allocations, aligned with global market capitalization ratios, benefited significantly from the rally in international stocks and the weakening dollar.
TCW MetWest Total Return Bond, the portfolios’ core fixed-income holding, had a strong year thanks to its longer-than-average duration, which capitalized on declining interest rates. However, this same strategy had hurt it in previous years. Despite recent manager changes, its experienced team and sound process earned it a Silver rating.
No changes were made to the mutual fund portfolios, as all holdings retain their Morningstar Medalist Ratings.
ETF Saver Portfolios
Aggressive ETF Saver Portfolio
Moderate ETF Saver Portfolio
- 40% Vanguard Total Stock Market ETF
- 8% Vanguard Small-Cap Value ETF
- 25% Vanguard FTSE Developed Markets ETF
- 7% Vanguard FTSE Emerging Markets ETF
- 20% iShares Core Universal USD Bond ETF
- 2025 Return: 19.63%
Conservative ETF Saver Portfolio
- 30% Vanguard Total Stock Market ETF
- 5% Vanguard Small-Cap Value ETF
- 12% Vanguard FTSE Developed Markets ETF
- 3% Vanguard FTSE Emerging Markets ETF
- 30% iShares Core Universal USD Bond ETF
- 10% Vanguard Short-Term Inflation-Protected Securities ETF VTIP
- 10% Vanguard Short-Term Bond ETF BSV
- 2025 Return: 13.99%
Performance Insights:
These portfolios rely on low-cost, broad-market ETFs but include a modest tilt toward small-cap value stocks via Vanguard Small-Cap Value ETF. Unfortunately, this exposure was a drag in 2025, as small-value stocks lagged the broader market. On the bright side, Vanguard Total Stock Market ETF, the largest holding across all portfolios, delivered stellar returns thanks to its heavy weighting in large-cap tech stocks.
In fixed income, iShares Core Universal USD Bond ETF performed in line with peers, but the Conservative ETF Portfolio’s focus on short-term bonds was a disadvantage in a year favoring longer-duration bonds.
No changes were made to the ETF portfolios.
Final Thoughts:
2025 was a year of surprises, with international stocks and mutual funds taking center stage. But as we look ahead, the question remains: will these trends continue, or are we due for another shift? And more importantly, how should you position your retirement portfolio for the long haul? Share your thoughts below—I’d love to hear your take!
