On paper, 2025 was a very good year for investors. The S&P 500 climbed roughly 17%, the Nasdaq gained more than 21%, and the Dow added nearly 14%. But those final numbers obscure a journey that tested the nerves of even the most disciplined investors.

Between February and April, the "tariff tantrum" sent U.S. stocks down 19%—just short of the traditional 20% threshold that defines a bear market. By early April, despair was everywhere. Then, over the next seven months, the S&P 500 surged nearly 40%, recovering all the losses and then some.

Almost no one predicted this. And that's precisely the point.

Here are eight lessons from 2025 that every investor should carry into the new year.

1. The Market Rewards Patience More Than Predictions

Investors who sold during the April lows locked in their losses. Those who held their positions—even through the stomach-churning decline—were rewarded with one of the sharpest recoveries in market history.

This isn't new wisdom, but 2025 reinforced it powerfully: time in the market beats timing the market. The investors who performed best weren't those who correctly called the bottom. They were those who simply stayed invested.

2. Earnings Still Matter

Amid all the noise about tariffs, Fed policy, and geopolitics, company fundamentals drove long-term returns. Big Tech and AI-related companies delivered robust profit growth through the third quarter, and their stocks performed accordingly.

The lesson: headlines grab attention, but earnings grab returns. Focus on what companies actually earn, not what commentators speculate about.

3. Concentration Cuts Both Ways

The "Magnificent Seven" once again dominated market returns. The B1000 Index outperformed the B2000, meaning larger companies continued to lead. But this concentration also created vulnerability—when mega-caps sneeze, the whole market catches cold.

Investors concentrated in index funds got most of the upside. But those same investors faced amplified risk when the biggest stocks wobbled. Diversification may have lagged in 2025, but it remains essential insurance.

4. The Obvious Trades Often Disappoint

Everyone knew AI would be big in 2025. But the biggest winners weren't the GPU makers everyone was buying—they were the storage companies few were watching. Sandisk rose 587%. Western Digital gained 292%. Nvidia returned a respectable 35%.

When everyone owns the consensus trade, the upside is often already priced in. The best opportunities frequently hide in the less glamorous corners of the market.

5. The Fed Drives Everything Until It Doesn't

Federal Reserve policy was a constant preoccupation throughout 2025. Rate cuts in September, October, and December boosted both stocks and bonds. But the hawkish December meeting reminded investors that Fed policy can shift quickly.

The lesson isn't to ignore the Fed—that would be foolish. It's to remember that Fed policy is inherently unpredictable, and building a portfolio around Fed expectations is building on sand.

6. International Diversification Tested Patience

U.S. stocks outperformed international markets again in 2025. For investors with diversified portfolios, non-U.S. holdings dragged on returns. The temptation to abandon international exposure is understandable.

But remember: U.S. dominance isn't guaranteed to continue forever. The same arguments for abandoning international stocks were made in 1999, just before a decade of U.S. underperformance. Diversification is about preparing for an uncertain future, not optimizing for the recent past.

7. Stock Picking Remains Incredibly Difficult

Here's a sobering statistic: only 19% of stocks in the S&P 500 outperformed the average stock's return from 2001 to 2025. Most individual stocks underperform. Most professional stock pickers underperform. The data is unambiguous.

This doesn't mean stock picking is impossible. But it does mean that index investing remains the default choice for most investors—and 2025 didn't change that calculus.

8. Time Heals Most Wounds

Since 1928, the S&P 500 has generated a positive total return more than 89% of the time over all five-year periods. Extend the timeframe to 20 years, and there has never been a period when the S&P 500 didn't deliver positive returns.

The April lows felt catastrophic in the moment. By December, they were a footnote. This is the power of long-term investing—what feels like crisis in real time becomes mere volatility in retrospect.

Carrying These Lessons Forward

As 2026 approaches, forecasters are already issuing predictions. Some see the S&P 500 hitting 8,000. Others warn of corrections ahead. If 2025 taught us anything, it's that such predictions are entertainment, not guidance.

The investors who will succeed in 2026 are those who stayed invested in 2025, who maintained diversification even when it hurt, who focused on fundamentals rather than headlines, and who remembered that volatility is the price of admission for long-term returns.

Those lessons aren't exciting. They don't make for compelling financial television. But they work. And in investing, what works is all that matters.