3 huge lessons I’ve learnt from the stock market in 2025
If there’s one thing the stock market in 2025 has taught me, it’s humility. This year has been anything but straightforward. The FTSE 100 has climbed to new highs, powered by solid performances from banks, insurers and commodity giants. Meanwhile, across the pond, the S&P 500 has similarly achieved record highs, largely fuelled by the relentless march of tech – Nvidia, Apple and Microsoft in particular.
But the year hasn’t been all plain sailing. Renewed trade tariff threats, political tensions and shifting interest rate expectations have kept investors guessing. Through it all, I’ve picked up three valuable lessons I reckon will serve me well for decades to come.
The power of diversification
If ever there was a year to hammer home the importance of diversification, 2025’s been it. Not only is it crucial to spread investments across different sectors – from energy and financials to healthcare and technology – it’s also wise to look beyond domestic borders. The UK market can often be sluggish compared to the US or even emerging economies.
Having a portion of a portfolio allocated internationally can smooth out local shocks and open doors to faster-growing regions.
Keeping a long-term mindset
Trying to catch the bottom or grab profits at the top usually does more harm than good. I’ve seen too many investors panic and dump shares during brief downturns, only to watch them rebound weeks later. Pound-cost averaging – that is, regularly drip feeding money into the market – takes the emotion out of timing decisions.
Over the long term, this approach tends to iron out the bumps and harness the stock market’s historical upward trajectory.
Only buy what you understand
It’s one of billionaire investor Warren Buffett’s oldest principles, yet it’s astonishing how often investors ignore it. I’ve been guilty of getting caught up in the hype around complex biotech or speculative tech firms I barely grasp. If I can’t summarise how a business makes money on the back of an envelope, I probably shouldn’t be buying its shares.
Sticking to companies and sectors I understand has not only reduced my stress but has likely improved my returns.
A stock that does it all?
That brings me to one holding I think embodies all three lessons: F&C Investment Trust (LSE: FCIT). This £5.3bn closed-ended fund is one of the oldest and most diversified vehicles on the market. It invests across multiple geographies and sectors, holding stakes in hundreds of companies worldwide.
Its track record is impressive. Over the past two decades, it has delivered annualised growth of 8.7%, comfortably beating inflation. It combines this with robust profitability – a staggering 95% net margin – and an attractive return on equity of 18.66%.
Its valuation also looks compelling, trading at a price-to-earnings (P/E) ratio of just 5.5 and a price-to-book (P/B) of 0.94, suggesting the market isn’t fully appreciating its underlying assets.
Add in a conservative debt-to-equity ratio of only 0.1, and it’s clear F&C’s in solid financial shape. Of course, like any trust, it’s subject to swings in global equity markets and can underperform if its underlying holdings falter. Plus, as a global equity trust, it’s heavily exposed to currency fluctuations.
Overall, I think it’s a solid option that aligns with the lessons I’ve learnt this year, so I plan to buy some shares during my next portfolio reshuffle.
The post 3 huge lessons I’ve learnt from the stock market in 2025 appeared first on The Motley Fool UK.
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Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple, Microsoft, and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
