Why individual investors may want to rethink a ‘set-it-and-forget-it’ strategy in 2025

A “torrid two-year stretch” prompted the S&P 500 to gain around 70%, but that momentum is stalling, Morgan Stanley Wealth Management said in its investment strategy research this week.

Consequently, the days of the “set-it-and-forget-it” approach, where individual investors reaped large gains just by parking their stocks in an S&P 500 index fund buoyed by the Magnificent Seven, may be over.

“The ‘set it, forget it’ is done,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management. “We can’t set it and forget it because there’s new considerations every morning when you walk in the door.”

The investment environment is shifting to a new period that Morgan Stanley is calling “The Great Normalization,” where rates and valuations may normalize, equities may be driven by earnings growth, and there may be less index concentration.

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The announcement that China-based company DeepSeek has built a powerful new artificial intelligence model may undermine U.S.-only dominance in the space, Morgan Stanley notes in its latest investment research.

Moreover, the Federal Reserve has also recently made it clear that they are going to be patient and are in “no hurry to cut rates any further,” Shalett said.

Despite a 30-day pause on tariffs for both Canada and Mexico, no one can predict what may happen when that time is up, she said — and how the market may react.

“When you have rising uncertainty, you need to price in risk,” Shalett said.

It’s now important for investors to be diversified and pay attention to the idea that risk premiums are going up, Shalett said.

“They should demand higher returns for the risk that they’re taking,” Shalett said.

Investors may look for value by seeking cheaper stocks where expectations aren’t already priced in, she said. In a more idiosyncratic market, some investment strategies like commodities or hedge funds may perform better, she said.

Tariff announcements sent markets falling early Monday, though news of a 30-day pause with Mexico prompted a rebound that same day.

Though just a blip, the event was a wake-up call for individual investors, financial advisors said. As new developments with tariffs and other initiatives may prompt market volatility, now is the time for investors to do a gut check to make sure they’re comfortable with their amount of equity exposure, advisors say.