YTD Asset Class Performance Through August 2025

Diversification outside of US stocks has added value

Until this year, US stocks had consistently been the best performing asset class over the past 15 years, so diversification did not work. But this year diversification outside the US into foreign stocks has added value, and gold is shining very brightly.

Consequently, diversified target date funds are winning this year. Most TDFs are concentrated in US stocks and bonds.

Diversification

As shown in the following, most target date funds are concentrated in US stocks and bonds. By contrast Soteria -- that follows the SMART Index -- is broadly diversified into Alternatives and TIPS.

Conclusion

The benefit of diversification is better risk-adjusted returns, but we usually see unadjusted returns, so diversification appears to have been unrewarded in the previous 15 years, but now we see the benefit this year even in unadjusted returns.