After years of watching U.S. markets and mega-cap tech stocks take the spotlight, Canadian stocks finally had their moment in 2025 and made it count. The Canadian market elbowed its way out of its global peers, with XIC posting a massive 31.6% return. That’s not just a good year. That is a declaration year.
Close behind Canada were international developed stocks, which surprised almost everyone with a gain of 25.37% (XEF). After a long period of underperformance, global stocks finally reminded investors why diversification exists in the first place. Appreciations were important again, leadership became broader and patience was rewarded.
US equities delivered solid, but unspectacular results by recent standards. The S&P 500 gained 15.6% (XSP), while the tech-heavy NASDAQ climbed 18.41% (XQQ). Still strong returns, but without the runaway dominance we became accustomed to earlier this decade.
Emerging markets kept their quiet comeback alive with a return of 19.2% (VEE). Nothing flashy, but a welcome change after years of false starts and frustration.
Then there was gold, which became one of the most breathtaking years in modern market history. Gold mining stocks exploded higher with a staggering 144.22% gain (XGD), easily the best-performing asset on the board in 2025. A mix of inflation fears, geopolitical uncertainty and renewed interest in hard assets lit the fire under the sector.
Which brings us to Bitcoin, and a tricky comparison. After a huge run in 2024, Bitcoin stumbled badly in 2025, ending the year down 10.6% in Canadian dollars. I thought Bitcoin was the new digital gold? It turns out that when things became real, investors turned to the old-fashioned version instead.
Bonds had another disappointing year in 2025. The long-awaited rate cut never materialized, and renewed rate threats reignited inflation fears just as markets were getting comfortable again. The result was a more sideways move for fixed income, with total Canadian bonds rising just 2.4% (VAB) and short-term bonds returning 3.68% (VSB).
Ben Felix has noted that bad stock returns are usually followed by good stock returns… eventually, but bad bond returns are usually followed by even more bad bond returns. Since the bond market disaster of 2022, this observation has held up quite well. Bonds have recovered nominally, but after inflation, returns in real terms have likely been flat to negative in recent years.
The lesson of 2025 is the same lesson that the markets are eager to repeat. Leadership rotates. Yesterday’s losers become today’s winners. Shiny new stories fade away. Boring diversification works.
You know I’m a big fan of asset allocation ETFs because they are a sensible way to invest for many Canadians. For approximately 19 basis points (0.19%) in fees, you get a globally diversified and automatically rebalancing portfolio that you can set and forget.
If investing is largely solved with low-cost index funds, then the complexity of investing is solved with these asset allocation funds. They are a true one-stop shop for your investment needs.
By investing passively through index funds, investors can achieve the above-mentioned returns, minus a very small fee. That’s a surefire way to beat over 90% of investors who invest more actively, pay higher fees, and are prone to behavioral issues like performance chasing.
With that in mind, here are the 2025 investment returns for several asset allocation ETFs offered by Vanguard and iShares:
Vanguard Asset Allocation ETFs
Vanguard offers a range of asset allocation ETFs, ranging from 100% global equities (VEQT) to 20% equities and 80% bonds (VCIP). Vanguard recently reduced the management fee for these ETFs to just 0.17% – which should mean a total MER of 0.19% if other fund costs are included next year.
I include the calendar year returns of VEQT, VGRO, VBAL and VCNS to show the performance of their most popular asset allocation ETFs:
| ETF | 2025 | 2024 | 2023 | 2022 | 2021 |
|---|---|---|---|---|---|
| VEQT (100/0) | 20.45% | 24.87% | 16.95% | -10.92% | 19.66% |
| VGRO (80/20) | 16.86% | 20.24% | 14.86% | -11.21% | 14.97% |
| VBAL (60/40) | 13.35% | 15.63% | 12.69% | -11.45% | 10.29% |
| VCNS (40/60) | 9.73% | 11.19% | 10.55% | -11.78% | 5.80% |
Interestingly, each step up the risk ladder gave you an additional return of about 3.5% last year, and about 4.5% in 2024. Even the traditionally conservative 40/60 portfolio returned to near double-digit gains thanks to strong stock performance in 2025.
iShares Asset Allocation ETFs
iShares offers a similar range of asset allocation ETFs with ticker symbols XEQT, XGRO, XBAL and XCNS. iShares also quietly reduced its management fee by 0.01%, so its total MER in 2026 should equal Vanguard’s at 0.19%.
The other differences between iShares and Vanguard are minor: iShares’ asset allocation ETFs come with slightly more U.S. and international stocks, while Vanguard’s asset allocation ETFs represent more Canadian and emerging markets.
Here are the five-year returns for iShares’ asset allocation ETFs:
| ETF | 2025 | 2024 | 2023 | 2022 | 2021 |
|---|---|---|---|---|---|
| XEQT (100/0) | 20.45% | 24.67% | 17.05% | -10.93% | 19.57% |
| XGRO (80/20) | 16.96% | 20.46% | 14.92% | -11.00% | 15.17% |
| XBAL (60/40) | 13.33% | 16.12% | 12.78% | -11.08% | 11.06% |
| XCNS (40/60) | 10.25% | 11.99% | 10.56% | -11.19% | 6.57% |
You can see that the returns are virtually identical across the board, with XEQT and VEQT essentially posting the same returns in 2025. Wild.
Vanguard vs. iShares 3-5 annual averages
Now that these asset allocation ETFs have been around for more than five years, we can start looking at their three- and five-year average returns for a better cumulative comparison.
After three calendar years of great returns, we may have forgotten just how bad returns were in 2022, especially for the more conservative portfolios. That’s why looking at average annual returns over several years can give us a more realistic picture of a typical investor’s experience (ideally we have more than 10 years of data, but here we are).
Vanguard asset allocation ETF 3- and 5-year averages:
| ETF | 1 year | 3 years | 5 years | Commencement |
|---|---|---|---|---|
| VEQT (100/0) | 20.45% | 20.71% | 13.40% | 13.50% |
| VGRO (80/20) | 16.86% | 17.30% | 10.50% | 9.33% |
| VBAL (60/40) | 13.35% | 13.88% | 7.60% | 7.36% |
| VCNS (40/60) | 9.73% | 10.49% | 4.70% | 5.35% |
These five-year average annual returns are still well above the return assumptions I use in my financial planning assumptions for clients (6.10% for global equities, net of fees).
You could say that we have brought forward the expected returns by a few years. That means we should probably lower our expectations for future returns so that the 10-year average becomes more like the 6.10% assumption.
iShares’ asset allocation ETF 3- and 5-year averages:
| ETF | 1 year | 3 years | 5 years | Commencement |
|---|---|---|---|---|
| XEQT (100/0) | 20.45% | 20.68% | 13.36% | 13.69% |
| XGRO (80/20) | 16.96% | 17.43% | 10.66% | n/a |
| XBAL (60/40) | 13.33% | 14.07% | 7.95% | n/a |
| XCNS (40/60) | 10.25% | 10.93% | 5.26% | 6.20% |
*Note that before 2019, XGRO and
If you can’t decide between the two, hedge your bets by putting a Vanguard asset allocation ETF in one account type, and an iShares asset allocation ETF in another account (or have one partner choose Vanguard and one partner choose iShares for a little friendly competition).
Whatever you do, don’t drive yourself crazy switching back and forth between the two chasing past achievements.
My investment returns for 2025
I have been investing in Vanguard’s all-equity ETF (VEQT) since March 2019. It’s a perfect solution for someone like me who wants to buy the entire market as cheaply as possible and move on with my life.
I keep VEQT in my RRSP, LIRA, TFSA and business investment account. I didn’t contribute to my RRSP (or LIRA of course) in 2025, but I did actively contribute to my TFSA and our business investment account.
As you know, the timing (and amount) of your out-of-pocket contributions will impact your personal returns. So while I expect my RRSP and LIRA to produce nearly identical returns to VEQT’s 20.45% calendar year 2025 return, the corporate account and TFSA returns may be different due to the timing of contributions. Let’s take a look:
- Business = 22.13%
- RRSP = 20.45%
- LIRA = 20.45%
- TFSA = 20.11%
The business account benefited from significant contributions early in the year, while I only started contributing more aggressively to my TFSA in the second half of the year.
I changed the kids’ RESP account in early 2024 to be more conservative as they reach ages 15 and 12. I added short-term bonds and changed the overall mix to about 35% stocks and 65% bonds.
We deposited $5,000 into the account in January to maximize CESG for both children.
While I’m kicking myself for missing out on a 15-20% gain if we had remained more aggressive with our equity exposure, the reality is we can’t take the risk of the markets taking a major plunge before we need these funds for post-secondary expenses and it takes a long time to recover. C’est la vie – that’s why I say the RESP is the most difficult account to manage.
Final thoughts on investment returns in 2025
Most Canadians still invest in actively managed mutual funds through their bank or other investment firm. These funds must overcome a huge hurdle – their high fees – to match (let alone beat) a passively managed portfolio of index funds.
Your job this month is to pull out your investment review and look at last year’s returns, along with the past five years’ returns, and see if your portfolio is keeping up with the returns of an asset allocation ETF.
Make sure you’re comparing apples to apples, that is, comparing your portfolio’s asset allocation to the returns of a comparable asset allocation ETF (i.e. 60/40 to 60/40) to get the full story. There’s no point in comparing your 60/40 portfolio to the NASDAQ 100. It probably wouldn’t be appropriate to invest in 100% technology stocks.
If you’ve looked at your investment overview and noticed that your returns aren’t adding up, it may be worth switching to a self-directed investing platform and buying a high-risk asset allocation ETF.
I truly believe that combining low-cost index investing with on-demand financial planning advice at key life stages can lead to very successful outcomes for many Canadians. Put that on your New Year’s resolutions list for 2026.
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