Portfolio update: 3Q2025

The third quarter of 2025 was strong for most asset classes, continuing the improvement that has been experienced since mid-April following President Trump’s retraction of his poorly received “Liberation Day” blanket tariffs.  Volatility has also settled down considerably since then.  The S&P 500 has closed at new record highs over 30 times this year, and 10-year UST bond yields have steadily declined, too, from 4.58% at the start of the year to 4.16% at the end of September.  Overall, the backdrop was constructive for investors in the third quarter.  Those investors with portfolios that lean into risk assets have experienced another rather extraordinary year so far.  It is worth noting though that as the quarter ended, a growing crescendo of investors were expressing concerns about frothy U.S. stock valuations in the context of some very visible economic headwinds.  I have made some tweaks to my portfolio accordingly, but largely remain well skewed as always towards equities.  This article contains a summary of my 3Q25 performance and performance YtD.

Context: Market returns YtD through September 30, 2025

To provide some context for evaluating my own portfolio performance, below are returns on select indices and asset classes for 2025 through the end of the third quarter. 

Broadly speaking, my portfolio is circa 75% equities (of which circa 16% of equities, or 12% or my total portfolio, is non-US), 9% is fixed income (government bonds > 3 mos and corporate bonds, all maturities), 7% is cash (including UST bills), 5% is alternatives, and 4% is gold.

My portfolio construction and performance, YtD through end 3Q2025

Asset class breakdown

Equities and gold were both higher as a percent of my total portfolio at the end of the third quarter compared to the end of 2024, not surprising given the run in the prices of stocks and gold so far this year.  Fixed income as a percentage of my portfolio was lower compared to year end.  Similarly, cash was also slightly lower as a percentage, but greater on an absolute basis reflecting my view that I suspect things as far as risk assets will start to get more difficult.  Alternatives were “valued” the best I could, and include private equity and private credit investments (all individual situations), fine wine, art and jewellery. 

Equity portfolio

My equity portfolio at the end of the quarter consisted of 22 individual stock positions and six ETFs.  Of the six ETFs, two are sector-focused (energy and infrastructure), and four are focused on non-US markets (Japan, China and two European).^[1]  

• As far as specific changes vis-à-vis the end of 2024, I now have only one stock that represents more than 5% of my portfolio – Berkshire Hathaway – and that position has been slightly reduced this year by taking some money off the table mostly around the time that the price surged in April/May. 

• Alphabet (GOOG), Microsoft (MSFT) and Altria (MO) have returned more than 20% YtD, with the surprise being the strong increase in shares of tobacco company Altria (which has also paid, and continues to pay, a very rich dividend because of its strong cash flow characteristics).  The stock prices of Amazon (AMZN) and Apple (AAPL) have barely moved YtD, which largely explains their decline as a percent of my total portfolio. 

• I sold all of my shares in LULU (late 1Q25) and NOVO (summer 2025), as I wanted to cut consumer discretionary companies (LULU) and simply lost confidence in NOVO.

• I also reduced CRWD into strength (too early admittedly based on performance since) and SBUX (consumer discretionary/shifting strategy) in preparation of a complete exit.

• Although AAPL moved back into the top 10, I also continued to reduce my position in this Mag 7 stock because I think its over-valued.  Having said that, the shares have come off their lows and have been surging as of late for reasons I cannot explain. 

I consider my equity portfolio relatively defensive (even with the tech holdings), although I know that if the proverbial shit hits the fan, my entire stock portfolio will take a hit, a topic I discuss further below.   One final point worth noting is that my trading volumes declined markedly in the third quarter (compared to the first half of the year), as the outlook improved, markets stabilised, and investors learned to take very little that President Trump says at face value.

Geographic mix of equity portfolio

My overall equity portfolio mix by geography is now slightly more skewed towards non-U.S. (domiciled) companies than it was at the end of last year, reflecting both additional investment into certain geographic ETFs (China, Japan and Europe), and the better relative run YtD of non-US stock markets.

Sector mix of equity portfolio

My equity sector mix changed slightly in the third quarter.  Information Technology and Financials still represent the largest two sectors collectively accounting for over one-third of my stock portfolio.  The Consumer Discretionary sector decreased, and the Healthcare sector increased, both conscience decisions reflecting the economic environment and my views of markets looking ahead.

Covered calls and market hedges

I continued to generate incremental income writing covered calls in the third quarter, with the underlying stocks called only in a handful of cases.  I generally let shares go if I considered them valued on the rich side, as I do not like exiting core positions without good reasons.  With stocks at or near record levels, I will continue to write short-dated covered calls (one to three weeks) well out-of-the-money to generate incremental portfolio income, on days when certain shares (or the market overall) surges. 

I also re-started buying market hedges in the form of out-of-the-money S&P 500 (SPY) and NASDAQ 100 (QQQ) puts. I currently own puts expiring from the end of November to the end of March 2026. I would estimate that one-third of my portfolio is hedged. The cost of these options is a drag on my portfolio returns, but I consider it a better alternative than trying to time the market by constantly moving into and out of stocks.

Fixed income portfolio

Fixed income including cash fell as a percent of my total portfolio.  This is less attributable to intentional reallocation, and more a function of stocks increasing so sharply in price this year.  Cash was slightly less as a percentage of my overall portfolio, but was actually higher in an absolute sense.  The slight decrease in corporate bonds was intentional reflecting some concerns with very tight credit spreads. 

Portfolio returns

My total portfolio returned 12.8% through the first six months of 2025.  The portfolio held in the US returned 11.9%, and my UK SIPP returned 11.1% on a £-basis and 18.2% on a $-basis, when converting the holdings from £ to US$ (which is the way I evaluate my aggregate portfolio).  I believe this is in line with my portfolio allocation.  I will withdrawal cash from time to time to support my family’s lifestyle since I am retired, all of which comes from my taxable portfolios held at my US brokerage.  

What’s ahead

Things feel a bit toppy to me, so I will continue to adjust marginally to take money off the table for some names and will use market hedges. There are certainly enough red flags on the horizon to concern me, but retail investors continue to aggressively support stocks any time there is even a slight dip. Let’s hope the one-way travel continues!

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^[1] Note that the two gold ETFs I own have not been included as part of my equity portfolio as they are instead classified separately on their own as “gold”.  Therefore, they are not included in this portion of my portfolio analysis. 

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