Monthly Outlook: December 2025

There’s an increasing amount of uncertainty in the air. Politics remain divisive, and the Federal Reserve balances stubborn inflation and rising unemployment. The Main St. economy shows clear signs of slowing, while the Wall St. economy continues to make new highs. There’s just a lot of competing issues and opinions and it’s difficult to know what to think and how to carry on. As wealth advisors, our focus is on how to make our clients’ net worth work to support their best life. Like most solutions, it’s really a combination of many strategies. But today, we’ll discuss 3 tips to make your wealth more resilient in times of uncertainty. The key to growing and preserving wealth is compounding returns over long periods of time. Resilient portfolios do that best because they provide steady returns and reduce the big drawdowns that crush the compounding effect.

Tip #1: Diversification of Holdings

You might have guessed this would be on the list. But let’s discuss real diversification, the kind that matters. We see many investors come to us with portfolios of 10 funds or maybe 50 stocks and some bonds. Just because a portfolio takes 3 pages on a report, doesn’t ensure it’s diversified. Too often, investors’ funds overlap with each other with many of the holdings in several funds. A NASDAQ 100 fund is just a ~32% subset of the S&P500 fund, for example. And a US Small cap fund is already a 7% component of the US Total Market fund. Sometimes, we’ll see a portfolio of 50 stocks. But if they’re all US Large Tech stocks, you’re not diversified.

True diversification requires investing in asset classes (or markets) across many, uncorrelated factors. You might consider: US Stocks (large, small, across all sectors), INTL & Emerging market stocks, Real Estate (residence, land, income producing), Commodities and Managed Futures, Bonds (US & INTL, all types), maybe a private business, and so on. We like to review our clients’ Net Worth Statement to ensure they have true diversification.

Tip #2: Diversification of Income

Similar to Tip #1, your net worth is more resilient if you have multiple sources of income or cash flow. Consider sources such as income from work, pensions and retirement plans, interest & dividends, capital gains, Social Security, rental income from real estate, profit distributions from a business, and so on. The more sources, the better. There are no guarantees that any one income source will last forever, so it’s best to layer it in.

If you’re already retired, it may be more difficult to create new income sources. But if you’re still creating your wealth, be mindful of how to invest so you’re creating these multiple sources of income now, or in the future.

Tip #3: Don’t Drive Without Brakes

Do you know what makes a Formula 1 car so fast? Good brakes! The goal is to make the car resilient, so you can aggressively handle whatever curves and speedbumps you might encounter. Similarly, investors should really focus on adding “brakes” to their investment portfolios, if possible, to make them resilient for whatever bull or bear markets come along. By “brakes”, I mean some kind of hedging or protection strategy that can reduce the inevitable drawdowns that are regular occurrences in markets. We use a systematic, rules-based strategy (iFolios) to sell when the price trends turn downward to reduce losses. There are other strategies, but the point is, you need something! Don’t drive your portfolio without brakes.

Over the past 100 years, there have been 56 stock market drawdowns of 10% of more, and some have been 20%, 30%, even 50%. You simply can’t compound growth if you give it all back in a major drawdown. Consider this math: a portfolio that has 5 annual returns of +20% +20%, -30%, +20%, +20% is worse than a resilient portfolio that returns a steady 8%/year. Furthermore, the more resilient portfolio will let you sleep.

One Caveat About Resilient Portfolios

I should mention one downside to managing your net worth with more resiliency. While you will do well with this approach, you will almost never beat the best performing asset class in any one year. This year, AI stocks and Gold have been stellar. In the 1970s, commodities were best. Real estate boomed in 2001-2006. You can’t compare a resilient portfolio to the hot market on the nightly news. This is how endowments, institutions, and smart HNW investors invest. And it’s how we’d like to help you invest, too.