How Did the Bucket Portfolios Perform in 2025?

Following years of lackluster results relative to US stocks, non-US stocks came on strong in 2025, bolstering solid results from all of the other portfolio constituents last year. Strength in foreign currencies relative to a declining dollar was a major tailwind for the international equity funds and exchange-traded funds in the portfolios.

As stocks continued their run in 2025, the Aggressive versions of the Bucket portfolios delivered higher returns than the Moderate and Conservative portfolios. But fixed-income holdings rallied as well. As interest rates declined, thanks to the Federal Reserve’s efforts keep the economy motoring along, the bond funds in the portfolios got a boost from capital appreciation in their holdings. (Lower yields make already-existing bonds with higher yields more attractive, thereby boosting their prices.)

The bucket system is designed to provide cash flows for retirees who are using their portfolios to generate living expenses, but the ideal asset to tap for cash will vary from year to year. At the end of 2025, retirees could trim appreciated equities, especially US stocks, to meet their cash flow needs, while leaving bonds and cash intact. Alternatively, retirees could reasonably spend their income distributions from bonds, cash, and dividend-paying stocks and scale back their equity exposure to meet any additional income needs. Note that all of these portfolios are geared toward investors’ tax-sheltered accounts. Investors in taxable accounts will want to pay attention to asset location, selecting investments that do a good job of limiting taxable capital gains and income distributions.

Here’s a review of the Bucket portfolios and how they performed last year.

Mutual Fund Portfolios

Aggressive Bucket Portfolio (Mutual Funds)

8% Cash

8%: Fidelity Short-Term Bond FSHBX

7%: Vanguard Short-Term Inflation-Protected Securities Index VTAPX

10%: Fidelity Total Bond FTBFX

7%: Vanguard Wellesley Income VWIAX

15%: Vanguard Total Stock Market Index VTSAX

25%: Vanguard Dividend Appreciation Index VDADX

20%: American Funds International Growth and Income IGIFX

2025 Portfolio Return: 15.83%

2025 Blended Benchmark Return: 16.61%

Moderate Bucket Portfolio (Mutual Funds)

10%: Cash

10%: Fidelity Short-Term Bond

10%: Vanguard Short-Term Inflation-Protected Securities Index

12%: Fidelity Total Bond

3%: Fidelity Floating Rate High Income FFRHX

5%: Vanguard Wellesley Income

10%: Vanguard Total Stock Market Index

25%: Vanguard Dividend Appreciation Index

15%: American Funds International Growth and Income

2025 Portfolio Return: 13.69%

2025 Blended Benchmark Return: 14.70%

Conservative Bucket Portfolio (Mutual Funds)

12% Cash

10% Fidelity Short-Term Bond

10% Vanguard Short-Term Treasury Inflation-Protected Securities

15% Fidelity Total Bond

5% Fidelity Floating Rate High Income

3% Loomis Sayles Income LSBDX

5% Vanguard Wellesley Income

20% Vanguard Dividend Appreciation Index

12% American Funds International Growth and Income

8% Vanguard Total Stock Market Index

2025 Portfolio Return: 12.28%

2025 Blended Benchmark Return: 13.19%

Performance Recap

As was the case in 2023 and 2024, the Aggressive Bucket portfolio bested its Moderate and Conservative counterparts in 2025. The Aggressive portfolio includes about 60% equity exposure, whereas the Moderate and Conservative portfolios include 50% and 40%, respectively, in stocks.

American Funds International Growth and Income provides the sole direct non-US exposure in the portfolios, and it notched a banner year in a soaring market for non-US stocks. Vanguard Total Stock Market Index also performed exceptionally well, thanks to its heavy weighting in red-hot technology and artificial intelligence-related stocks.

The fixed-income holdings in the portfolio all posted positive returns in 2025, with the most interest rate- and credit-sensitive holdings scoring the biggest gains. Fidelity Total Bond and Loomis Sayles Income (formerly Loomis Sayles Bond) generated the best fixed-income returns of any holdings. And thanks to higher money market yields still on offer today, the cash component of the portfolio outperformed the inflation rate over the past year. For the sake of modeling, I assume Vanguard Federal Money Market for cash returns. In 2025, that fund returned 4.22%. That good yield is a reminder to check your cash holdings to ensure that you’re wringing as much from them as you can while the getting is good.

I always compare the portfolios’ performance to a blended benchmark of basic index funds that matches the portfolios’ asset-allocation exposure. The goal is to see whether security selection has added or subtracted value; I would urge you to conduct the same exercise with your own portfolio. For 2025, the Bucket portfolios comprising mutual funds failed to beat their simple blended benchmark of three index funds and cash last year. The major culprit was Vanguard Dividend Appreciation Index, which lagged a simple total stock market index fund, as well as the fixed-income sleeve’s exposure to short-term bonds. I’m not bothered by the weak relative showing of Vanguard Dividend Appreciation last year, though, because the fund’s main selling point is strength during periods of market volatility rather than giant gains during rallies. However, investors who would like to maintain a minimalist portfolio comprising basic index funds can reasonably do so; I’ve provided some model in-retirement portfolios along those lines.

Portfolio Changes

None. All of the holdings in the portfolios retain Analyst Ratings of Bronze or better. Loomis Sayles Income saw the biggest changes in 2025—a mandate and name change—but it retains a Silver rating. It will no longer own equities, but stocks weren’t central to its role in the Conservative portfolio.

ETF Portfolios

Aggressive Bucket Portfolio (ETFs)

8%: Cash

8%: Vanguard Short-Term Bond ETF BSV

7%: Vanguard Short-Term Inflation-Protected Securities ETF VTIP

10%: iShares Core Total USD Bond Market ETF IUSB

4%: Vanguard High-Yield Corporate VWEAX

3%: iShares J.P. Morgan USD Emerging Markets Bond ETF EMB

25%: Vanguard Dividend Appreciation ETF VIG

15%: Vanguard Total Stock Market ETF VTI

20%: Vanguard FTSE All-World ex-US ETF VEU

2025 Portfolio Return: 15.35%

2025 Blended Benchmark Return: 15.91%

Moderate Bucket Portfolio (ETFs)

10%: Cash

10%: Vanguard Short-Term Bond ETF

10%: Vanguard Short-Term Inflation-Protected Securities ETF

12%: iShares Core Total USD Bond Market ETF

3%: Fidelity Floating Rate High Income

2.5%: Vanguard High-Yield Corporate

2.5%: iShares J.P. Morgan USD Emerging Markets Bond ETF

20%: Vanguard Dividend Appreciation ETF

15%: Vanguard Total Stock Market ETF

15%: Vanguard FTSE All-World ex-US ETF

2025 Portfolio Return: 13.51%

2025 Blended Benchmark Return: 14.09%

Conservative Bucket Portfolio (ETFs)

12%: Cash

10%: Vanguard Short-Term Bond ETF

10%: Vanguard Short-Term Inflation-Protected Securities ETF

20%: iShares Core Total USD Bond Market ETF

3%: Fidelity Floating Rate High Income

2.5%: Vanguard High-Yield Corporate

2.5%: iShares J.P. Morgan USD Emerging Markets Bond ETF

28%: Vanguard Dividend Appreciation ETF

12%: Vanguard FTSE All-World ex-US ETF

2025 Portfolio Return: 11.78%

2025 Blended Benchmark Return: 12.57%

Performance Recap

As with the mutual fund Bucket portfolios, the Aggressive ETF portfolio (60% in equities) outperformed the Moderate ETF portfolio (50% in stocks), which in turn bested the Conservative ETF portfolio (40% in stocks) in 2025.

In a turnabout from 2024, the ETF Bucket portfolios underperformed the analogous mutual fund portfolios last year. But the return differential between the ETF and mutual fund portfolios continues to be fairly small, an indication that the two series’ risk/return profiles are pretty closely aligned.

Like the mutual fund portfolios, the ETF portfolios lagged their ultraminimalist benchmarks of cash plus total market index funds, mirroring their asset-class exposures. As with the mutual fund Bucket portfolios, Vanguard Dividend Appreciation, the largest equity holding, explains much of the underperformance. Its conservative positioning held it back relative to a total market index fund in last year’s rally. However, the Bucket portfolios are designed to keep risk and volatility down, as well as generate returns, so I’m not concerned about the dividend-focused fund’s relative underperformance during a rally. Retirees who are more comfortable with equity-related volatility could reasonably hold a minimalist ETF portfolio along these lines.

Portfolio Changes

No changes, though investors may want to do some rebalancing following 2024’s strong gains in equities. As with the mutual fund Bucket portfolios, it would be logical to lighten up on US equities to meet cash flow needs and/or restore asset allocations back to targets.