Investment strategies

An investment strategy is the secret sauce that sets successful investors apart. 

A good action plan guides our investing decisions. It removes emotion from the process and provides a rational backdrop for assessing investment prospects. 

Planning for success

Most of us, at some point in our lives, have learned the hefty lesson behind Benjamen Franklin's famous quote, 'By failing to prepare, you are preparing to fail'.

It's fair to say that many of us learned that the hard way.

Preparation (research and stock market analysis) and good planning (developing a strategy) are keystones of success, particularly in the world of investing.

Take a look at history's most famous investors. They are notable not just for their success but for the strategies they used to achieve it. They identified strategies, stuck to them through market booms and busts and came out on top. 

Today, legendary investor Warren Buffett is synonymous with value investing. It's just one possible investment strategy you can follow to guide your investing. There are numerous other investment methods available to Australians. 

Top investing strategies for Australians 

An investment strategy is an action plan that helps you choose suitable investments for your financial situation, goals, and risk tolerance. Which approach you choose will depend on your personal preferences and individual circumstances. 

You can also use a combination of strategies to meet your needs. The important thing is to use one (or more) that works for you and follow through with action. 

Your investment strategy will inform the asset allocation in your investment portfolio and how you handle investment risk. 

Below, we'll go through the most common ones and the top analysis methods so you can determine which strategy is right for you. 

1. Income-based investing 

Income-based investing involves making investments in companies that are known for paying dividends. Dividends are profits that companies partly distribute to shareholders.

Companies that pay dividends will likely be more mature and established, with reliable income streams. Shareholders receive additional income when they are paid dividends. They can use this income to meet living expenses or reinvest it to buy more shares that generate even more income in the future. 

Dividend investors seek to maximise investment income. They look for ASX shares with a track record of paying reliable dividends, and revenue flows to support the payment of dividends in the future. 

This strategy provides a return on investment that is not contingent on capital gain. Dividends can provide a good hedge against inflation, especially if they increase over time, and they may provide tax benefits due to franking. 

To learn more, check out our article on income-based investing strategies.

2. Growth investing 

As the name suggests, growth investing focuses on investments with significant growth prospects. These may be start-ups or smaller companies experiencing rapid growth. Growth investors look for products and businesses with the potential to cause disruption and change the way things are done. They seek to invest in these types of companies in their early stages, with the expectation they will see strong growth. The investor, in turn, expects to receive a significant return in the form of capital growth. 

In 2025, this strategy has evolved to reflect the post-pandemic economic recovery and the rapid advancement of technologies like AI, green hydrogen, and quantum computing.

Key Characteristics of Growth Investing

• Disruptive Potential: Growth investors target products and businesses that have the potential to cause significant disruption and change within industries, such as those that led Apple Inc and Microsoft Corporation to transform global markets.
• Early-Stage Opportunities: Investors seek out companies in their nascent stages with an expectation of strong growth, resulting in substantial returns through capital growth.

Key Growth Investing Trends in 2025

• Focus on the Energy Transition and Healthtech: Domestically, Australian sectors tied to the energy transition and health technologies are showing momentum. Companies such as Pilbara Minerals (ASX: PLS) in lithium production and ResMed (ASX: RMD) in healthtech are leading the charge.
• Technology and Innovation: Growth ETFs focusing on AI, biotech, and semiconductor technologies are showing strong growth, providing investors with diversified exposure to cutting-edge innovations.
• Robo-Advisors: These advisors provide dynamic growth allocations based on individual user goals and risk profiles, enhancing the accessibility of growth investing strategies.

Finding ASX growth stocks is an active investment strategy involving in-depth analysis. You'll want to look at the financials, growth prospects, and industry standing for any potential growth investments. It can help if you have specialist insight into the industry in which a potential investment operates, as this can allow you to understand its prospects better. 

3. Value investing 

Value investors look for companies they think are undervalued by the stock market. They anticipate that the stock market will realise the company's intrinsic value sometime in the future, and the share price will increase. 

ASX value shares may not necessarily have explosive growth prospects but should represent a bargain. That way, when market sentiment becomes more buoyant, the value investor can benefit from rising share prices.  

In 2025, this approach remains particularly resilient during periods of market overvaluation and macroeconomic uncertainty, offering investors the opportunity to capitalize on robust companies trading below their intrinsic value.

Principles of Value Investing

• Intrinsic Value Recognition: Value investors focus on companies that, despite not having explosive growth prospects, are undervalued by the market. The aim is that the market will eventually recognize the company's true worth, resulting in share price increases.
• Patience and Long-term View: Identifying and investing in value stocks requires diligence and a long-term perspective, as it can take time for the market to adjust to the stock's intrinsic value. However, the potential returns from quality value stocks are significant and rewarding.

Key Value Investing Trends in 2025

• AI-driven Screening Tools: Value investors are leveraging sophisticated AI-driven platforms that efficiently identify underpriced opportunities across various sectors. These tools have enhanced the precision in identifying potential value stocks.
• Attractive Sectors: In Australia, financials, insurance, and certain cyclical industrials present attractive value propositions as their earnings stabilize and valuations remain low compared to historical norms.
• Digital Platforms for Retail Investors: New digital platforms are providing retail investors with tools reminiscent of Buffett-style value screening, making it easier to discover undervalued opportunities.
• Institutional and Deep Value Investments: There's a resurgence of institutional capital into deep value Listed Investment Companies (LICs). Additionally, value-focused funds are broadening their scope to include companies poised to benefit from climate-transition opportunities due to changing environmental regulations.
• Predictive Analytics for Contrarian Strategies: Advanced analytics are enhancing contrarian strategies by identifying early mean-reversion trades, allowing investors to capitalize on fluctuations in market sentiment.

Value investing requires an active approach, thorough analysis of financial standing, and a comparative assessment against current prices. For those interested in deeper insights, our article on value investing offers detailed strategies and methodologies to maximize this approach in the current market climate.

4. Investing in funds 

This strategy involves investing money into a pooled investment vehicle that holds numerous stocks or assets rather than buying each ASX share individually. 

Investing in funds is a quick and easy way to diversify your portfolio and provide opportunities for exposure to different investment themes without having to do all the time-consuming research yourself. 

All sorts of funds are available to ASX investors, each offering different benefits and disadvantages. They include popular platforms such as exchange-traded funds (ETFs) and index funds to listed investment companies (LICs), managed funds and mutual funds.

Read our article on investing in funds for everything you need to know about this investment strategy.

5. Buy-and-hold investing 

Buy-and-hold investors take a position and ride it out. Over time, equity markets typically increase in value, but on a day-to-day basis, they can be volatile. Buy-and-hold investors stick with their investment choices for the long term. 

There are many benefits to holding ASX shares for the long term. Portfolios remain relatively stable over time, and investment fees stay low, avoiding the costs of active management. Investors can also defer taxes on capital gains if they hold assets rather than sell. 

Buy-and-hold investors may also utilise another investment strategy, such as buying value shares, while employing the buy-and-hold strategy. Famous investors, including Warren Buffett, have praised this approach, recognising its ability to deliver healthy long-term returns. 

To learn more, read our in-depth article on long-term investing.

6. ESG investing 

Environmental, social, and corporate governance (ESG) investing, also known as impact investing, has emerged as a mainstream strategy in Australia. This approach is largely driven by super funds, regulatory bodies like ASIC/ASFA, and shifting consumer preferences. ESG investing evaluates how businesses interact with the natural environment in their operations and the impact their products and services have on customers' lives.

Key ESG Investing Trends in 2025

• Focusing on the E: Climate-focused strategies are being refined, shifting from broad ESG to more targeted climate transition themes such as net-zero, clean tech, and carbon capture.
• Mandatory ESG Disclosures: Such requirements are driving greater transparency among listed companies.
• Carbon Credits and Green Bonds: These instruments are gaining traction as effective hedging tools.

This investment strategy may involve negative screening, where investors exclude companies that do not align with their values. It can also include positive screening, where investors seek out companies outperforming their peers on ESG factors. 
ESG investing is relatively active, requiring diligent due diligence on potential investment targets. Investors are increasingly viewing ESG not just as a compliance requirement but as a significant performance driver. Exclusionary screens are being replaced by active engagement and a focus on mandates for positive impact.

7. Other investment options

Diversification is one of the most effective ways to protect your investment portfolio. By not putting all your eggs in one basket, you spread the risk and avoid being wiped out if one or two investments fail. 

Diversifying your portfolio means investing in 15 to 25 ASX shares across different market sectors and even geographic locations. 

There are also many different types of investments to add to the mix and diversify further. These include cash, bonds, cryptocurrency, funds, property investment, international shares and more. 

For insights into other investment options, check out our articles on investing in international shares and cryptocurrency.

Critical analysis methods

Investors can use both fundamental and technical analysis to assess the prospects of their potential investments. 

Fundamental analysis examines the financial and economic factors that impact a business to assess its value. 

Technical analysis uses data from a share's price movement to predict its future performance. These are two approaches to assessing share value, and there is much debate about which is preferable. 

Fundamental analysis is grounded in a company's cash flow, with analysts examining financial statements for insights into value. The fundamental approach examines a company's income and balance sheet and attempts to assess the future cash flows an investment in the company will generate. 

Technical analysts believe that all relevant information about a company is reflected in its share price. Instead, they focus on a stock's price movement to discern its future direction. 

To learn more, read our article on stock market analysis styles.

How to choose the best investment strategy for you 

When starting on your investment journey, it is essential to have a plan to guide your actions. Your investing strategy helps you plan the trip.

Which strategy (or strategies) you utilise will depend on your financial circumstances, investment objectives, and attitude to investment risk. It also depends on whether you are interested in active investing or prefer a passive approach. 

Different investment strategies suit different investors and market conditions. Active methods require more input from investors, while passive investing requires less. Regardless of which approach you use, there are some basic investment principles you can follow to optimise your journey: 

1. Choose a suitable investment account: You'll need a brokerage account to buy or sell shares or funds. There are a bunch of online brokers that Australian investors can choose from to handle their trading. Look at account and trading fees to ensure you get the right deal for your plans.

2. Invest consistently: Once you've opened your brokerage account, you'll need to fund it before you can start buying ASX shares. Try to make it a habit to set money aside to invest regularly. This creates momentum, which can supercharge long-term returns.

3. Diversify: Diversification is the practice of investing in different sectors and asset classes and acts as a hedge against volatility. 

4. Have a long-term time horizon: Investing is about setting yourself up for the future, not getting rich quickly. Holding on for the long haul and gradually adding to your portfolio will allow your returns to compound over time.

5. Keep learning: Ensure you understand what you're investing in and which factors may impact its performance. Research companies you are interested in and the industries in which they operate. You can't expect to know everything overnight, but you should work towards expanding your knowledge and wealth over time. 

Foolish takeaway

Ultimately, an investment strategy only delivers results if we put it into action. It's easy to delay—waiting for more time, more money, or the "perfect" moment. But in 2025, with accessible platforms, fractional investing, and diversified ETF options, the barriers to getting started are lower than ever.

Getting started remains the most important step. The earlier you begin, the more time you give compounding to work its quiet magic. Focus on building long-term wealth in ways that are difficult to replicate with short-term moves. Warren Buffett's success didn't come from market timing. It came from discipline, consistency, and decades of compound growth.

The Motley Fool's core philosophy – investing in quality companies, holding them long-term, and ignoring market noise – has never been more aligned with current trends. As Australia leans into sustainable industries, digital transformation, and financial accessibility, investors have more opportunities to apply this approach than ever before.

Whether your goals are income, growth, sustainability, or tech disruption, there's a strategy—and a Foolish path—for you. The key is to start, stay the course, and let time do the heavy lifting.

FAQs

What's the best investment for 2025?

Clean energy, technology, and healthcare are poised for growth in 2025. The global push for sustainability boosts clean energy investments, aided by technological advancements and supportive regulations. Innovation in AI, quantum computing, and cybersecurity drives the technology sector, while an aging population and digital health expand healthcare opportunities. Diversifying investments in these areas offers potential stability and growth.

Which investment is best for the next 5 years?

The best investment for the next five years is likely to include a mix of technology, renewable energy, and healthcare sectors, which are poised for substantial growth. Additionally, maintaining a diversified portfolio with a focus on global index funds or ETFs can help mitigate risks while capitalizing on emerging opportunities.

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