While growth and value investing have traditionally been viewed as opposing strategies in the stock market, experts interviewed by ET suggest that a more nuanced and strategic approach may be the key to navigating the challenges of the upcoming year.
Growth vs. Value Investing
The debate between growth and value investing may never have a clear winner, but experts agree that a sophisticated and diversified strategy will be crucial for success in 2025.
By combining the best elements of growth, value, and quality investing, investors can position themselves to capitalize on market opportunities while minimizing risk in 2025.
1. One sophisticated strategy that experts recommend is the Discount to Intrinsic Value Approach. Ashwini K. Shami, EVP & Portfolio Adviser at Omniscience Investment Adviser, argues that simply classifying stocks as growth or value based on P/E or P/BV multiples is outdated. Shami believes that a more refined approach is necessary for 2025 and beyond: focusing on the discount to intrinsic value.
Shami suggests that identifying fundamentally strong companies with exposure to growth vectors, available at a discount to their intrinsic value, is the ideal strategy. This approach, grounded in scientific investing frameworks, allows investors to build a portfolio that captures multiple sources of alpha – higher yield, higher growth, and upward re-rating.
By concentrating on undervalued companies with strong growth potential, investors can aim to maximize returns in the years ahead.
2. Achieving a Balanced Investment Approach: Incorporating Growth and Value in the Right Proportion
Deepak Ramaraju, a seasoned Senior Fund Manager at Shriram AMC, emphasizes the importance of maintaining a balanced perspective when it comes to investment strategies. He argues that favoring either growth or value investing exclusively may not yield the best results.
Ramaraju advocates for a well-calibrated blend of both growth and value investing within a portfolio. He asserts that the key to success lies in understanding one’s risk tolerance and investment horizon.
While India’s promising growth prospects and premium valuations compared to its peers make growth investing an appealing choice, Ramaraju underscores the benefits of diversification. By incorporating both growth and value elements, investors can mitigate risks associated with market volatility and capitalize on opportunities across various market cycles.
3. Embracing a Conservative Approach: Prioritizing Safety and Prudence
Sahil Kapoor, the Head of Products and Market Strategist at DSP Mutual Fund, recommends a cautious investment strategy for the year 2025. Kapoor advises investors to focus on themes that have historically demonstrated resilience and to maintain conservative expectations.
By establishing adequate safety nets and exercising patience to ensure a substantial margin of safety, investors can navigate market fluctuations with confidence. This prudent approach emphasizes long-term capital preservation and strategic growth, equipping investors to navigate the uncertainties that lie ahead in 2025.
4. The Resurgence of Value Investing and the Emergence of Quality Investing
Abhijit Bhave, the esteemed Managing Director & CEO at Equirus Wealth, foresees a potential resurgence of value investing in the year 2025.
Bhave predicts that as investors seek opportunities in sectors with solid fundamentals and reasonable valuations, value stocks will regain prominence. Simultaneously, growth stocks, particularly in the technology and green energy sectors, will continue to attract attention but will require careful selection due to their lofty valuations.
However, Bhave emphasizes that quality investing may emerge as the true victor in 2025. By conducting thorough fundamental research and investing in companies at reasonable prices, investors can potentially achieve minimal losses and attractive risk-adjusted returns.
Quality investing, which focuses on strong financials and sustainable business models, has the potential to outperform both value and growth investing in the upcoming year.
What Should Investors Do?
As we enter 2025, it is evident that there is no one-size-fits-all approach to investing. Experts recommend a blend of growth, value, and quality investing, coupled with a strategic emphasis on companies trading below their intrinsic value, to maximize investment opportunities.
The key is to customize strategies based on individual risk tolerance, investment objectives, and market conditions. Diversifying portfolios, ensuring a margin of safety, and maintaining patience as market trends evolve are crucial for success.
Whether through a resurgence of value investing or selective growth stock picking, 2025 presents numerous opportunities for investors who are willing to take a deliberate, well-researched approach to their investment decisions.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resources like Moneycontrol and NSE India.
Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.