The S&P 500 returned 17.9% in 2025, its seventh-best year since 2010, according to RIABiz, which cited multiple data sets. That figure is a calendar-year return for the index itself, not a prediction about any future year. It also came with a comparison attached: the average hedge fund returned 12.6% in 2025, so a plain index fund beat the professionally managed field by roughly 5.3 percentage points.
That gap is the story worth measuring. Hedge funds had what RIABiz called their best year since 2009, and they still trailed the index. This article walks through what the 2025 number establishes, how it compares with recent history, and which parts of the usual year-in-review story the available data does not cover.
What does the 2025 return actually measure?
The 17.9% figure is the S&P 500's calendar-year return for 2025, as compiled by RIABiz from multiple data sets. It covers the 500 companies in the index — technically 503 stocks, because some companies such as Alphabet issue more than one class of shares. The comparison figure, 12.6% for hedge funds, comes from Hedge Fund Research data cited by Bloomberg in RIABiz's report.
One measurement note belongs here. The sources do not state whether the 17.9% is a total return with dividends reinvested or a price-only return, and they do not break the year down by sector. Those details change how the number should be read, and this article does not fill them in. What the sources do establish is the headline figure, the hedge-fund comparison, and the year's rank among recent years.
How does 2025 compare with the index's recent history?
RIABiz describes 2025 as the S&P 500's seventh-best year since 2010. The same report notes that a $10,000 investment in the index over the last 16 years would have grown to $30,569, a gain of 205.69%, while the same investment in a hypothetical average hedge fund would have grown to $19,956.
The index has not outperformed every year. According to RIABiz, the average hedge fund beat the S&P 500 in only three of the last 16 years — 2015, 2018 and 2022 — and in each case it did so by losing less during a down market. RIABiz estimates the index has outperformed hedge funds by an annual average of 6.63 percentage points over that span. That is an estimate built from multiple data sets, not an audited benchmark, and it should be read as such.
Why do record highs keep drawing buyers?
Because the historical record says buying near a peak has not been the mistake people expect. The Motley Fool reported that a 2020 JPMorgan Chase analysis of S&P 500 returns back to the start of 1988 found investors who bought the index on a random day made money over the following year 83% of the time, with an average 12-month total return of 11.7%. Investors who bought only on days the index closed at an all-time high did better on both counts: gains 88% of the time, with an average 12-month return of 14.6%.
The same report cites Fidelity research covering 1980 through 2025. Declines of 5% or more appeared in 93% of those calendar years, and drops of 10% or more — the standard definition of a correction — showed up in 48% of them. Yet the index still delivered an average calendar-year return of 13.3% across that stretch, because the largest drop within a year averaged about 14% while most years finished higher anyway.
These are long-run averages over 46 years, not statements about any single entry point. The Motley Fool's own framing carries the same caution: nothing in that history rules out a large decline from today's prices.
What does this mean for how you read a year-end number?
Three things, and none of them is a forecast.
- The comparison matters as much as the level. A 17.9% year sounds strong on its own; against hedge funds' best year since 2009, it becomes a statement about fees versus index exposure. Complexity does not guarantee better outcomes, as Jeff DeMaso, editor of the Independent Vanguard Advisor, put it in comments RIABiz published.
- Averages hide the path. The Fidelity figures show corrections arrive regularly and still coexist with solid average annual returns. A single year's return says little about the drawdown an investor sat through to get it.
- Valuation conditions the starting point. The Motley Fool report notes the Vanguard S&P 500 ETF traded at about 27 times earnings in late 2026, and warns that from a starting point this expensive, the next decade of returns may land below the market's long-run averages. That is an argument about forward expectations, not a measured outcome.
For readers who follow model-based forecasting, the discipline is the same one applied to any backtest: state the window, state the baseline, and separate claimed performance from independently verified performance. A calendar-year return is a clean measurement of one window. Extending it into a rule about what happens next is where the measurement problem starts — the same trap covered in our piece on probability of backtest overfitting. Readers following this should also see What is 'probability of backtest overfitting,' and how is it actually measured?.
What the sources do not establish
This is the mandatory part of any honest year-in-review, and the gaps are real.
- The sources provide no sector-by-sector contribution data for 2025, so no claim about which industries drove the year can be made here.
- The dividend treatment of the 17.9% figure is not stated, so total-return versus price-return comparisons with other years cannot be settled from this evidence.
- The JPMorgan and Fidelity statistics are secondhand, reported by The Motley Fool rather than drawn from the firms' original papers. They are attributed accordingly and not treated as independently verified.
- Hedge-fund averages aggregate very different strategies. RIABiz notes individual funds varied widely in 2025 — it reports BlueCrest Capital at 73% and Apis Capital at 55.1%, per Bloomberg — so the 12.6% average describes the field, not any single manager.
What the evidence does establish is narrow and useful: the index returned 17.9% in 2025, beat the average hedge fund by about 5.3 percentage points in that fund category's best year since 2009, and has done so in 13 of the last 16 years according to RIABiz's compilation. Everything beyond that — what 2026 brings, whether the streak continues — is outside what a year's measurement can say.
Where the number leaves off
A calendar-year return is a record of one completed window. It tells you what happened, not what must happen next, and the 46-year record cited above shows both things at once: frequent corrections and a positive average annual return coexisting for decades. Readers weighing index exposure against alternatives can compare the measurement discipline here with how we treat implied volatility as a price versus realized volatility as a measurement — the distinction between what the market expects and what it actually delivered is the same one that separates a forecast from a result. This connects to our earlier piece, Implied volatility is a price, realized volatility is a measurement.
Read more in our markets guide: Bond yield prediction with machine learning: what the models can and cannot establish
