- Bargain hunting proved to be a winning strategy in 2025 in AJ Bell’s Investor Style League
- Being a herd investor was the worst strategy but still returned a respectable 7.1%
- Regional egg spreading enjoys a rare win against global indexing
- Over a longer timeframe, simply sticking your money in a global tracker has been the best performing strategy
- But in 2025 strong returns from stock markets outside the US relegated a passive approach to the bottom half of the performance table
Laith Khalaf, head of investment analysis at AJ Bell, comments:
“Our annual Investor Style League compares seven different approaches to investing to examine which strategies serve investors best, both in the short term and the long run.
“In 2025 bargain-hunting proved to be the winning strategy. Our model for this approach assumes that at the beginning of each year, our bargain hunter invests in the worst performing IA fund sector of the previous 12 months. At the start of 2025, the Latin America sector had returned -25% over the course of the previous year. But it staged an enormous comeback in 2025, returning 38.7% and topping the Investor Style League table.
“That’s partly because valuations in Latin America were trading at rock bottom heading into 2025. Mexico was at the time front and centre of the Trump tariff tantrum, and investor confidence was extremely low after a brutal year of negative performance in 2024. But a weaker dollar has helped inflationary concerns in Latin America, and investors are now looking on the region more constructively.
Investor Style League
Sources: AJ Bell, FE, Investment Association, Morningstar, total return in GBP 1 January to 31 December 2025.
International indexers beat global stock pickers
“Bargain hunting is a risky and high octane investment approach which can lead to extreme outcomes in both directions. And over a period of 10 years, it has still returned a fair chunk less than a global index fund, a simple strategy which tops our Investor Style League in the longer term. Admittedly it’s been an extremely favourable period for trackers because the last decade has been characterised by the biggest companies in the market performing well and getting even bigger, and a reversal of that trend could see more active strategies come to the fore.
“Global stock pickers, as represented by the IA Global sector average, have performed well in absolute terms, but few have managed to keep up with their passive peers. In the current market environment the performance gulf is understandable, but that won’t stop investors voting with their feet and plumping for cheaper passive vehicles that have demonstrably performed better.
Performance chasing has worked well in momentum-driven markets
“Performance chasers do the opposite of bargain hunters in our model. In other words, they invest in the best performing IA fund sector of the previous 12 months. Heading into 2025 that was the Financials and Financial Innovation sector, which continued to perform well across the year, returning 15.8%. As can be seen from the performance chasing and bargain hunting sector selections, picking from the very top or the very bottom of the past performance table can lead to investment in niche and specialist sectors, which come with higher risks attached and, sometimes, that means higher returns too.
“Performance chasing has worked well in momentum-driven markets where the strong have gotten stronger, but common sense dictates it’s not a sensible investment policy in and of itself. The same goes for bargain hunting. Just because something has gone up or down in value by a large amount doesn’t make it a good home for your money, and returns can be Hollywood or bust.
Contrarian versus herd investors
“Being a contrarian and a herd investor, that is to say buying the least popular and the most popular fund sector of the previous 12 months respectively, have both yielded remarkably similar results in the long run. While returning less than other strategies, these approaches have still almost doubled your money over 10 years, which is a consolation for bringing up the rear of the table, and reflects the fact it’s been a good decade to be an investor, whatever strategy you’ve employed.
“In 2025 herd investing was the worst performing strategy in our Investor Style League, returning 7.1%. Not a bad result in a normal year, but that’s an adjective that sits uncomfortably alongside 2025. The most popular sector of 2024 was an unusual crowd-pleaser: Corporate Bond funds. This was probably driven by multi-asset portfolios and financial advisers buying funds in this sector on behalf of customers, rather than a groundswell of direct retail investor demand. A 7.1% return is a pretty good result for the sector, though in 2025 it was left looking very pedestrian by hot equity markets.
“In 2024 the least popular fund sector was UK All Companies, as it has been since 2021. Being a contrarian and buying UK stocks hasn’t worked out great in recent times, but in 2025 the UK stock market had a blinding year, and contrarian investors enjoyed the spoils, seeing a 15.4% return on their money. It remains to be seen whether this is the start of a sustained period of better performance for UK stocks, and importantly, whether that results in retail investors buying UK equity funds once again – or perhaps simply not selling them down to the same extent.
Egg spreading enjoys a rare win against global indexing
“One might look back at 2025 and say it was a terrific year for muck spreading, but egg spreading did pretty well as an investment strategy too. This diversified approach invests in a portfolio of funds equally representing five global regions: North America, the UK, Europe, Japan and Emerging Markets.
“Significantly, 2025 was the first year that spreading your eggs in this way beat a global indexing approach since 2017, returning 16.8% compared to 13.0%. A global indexing approach is much more heavily exposed to the US stock market, and while the S&P 500 performed well in 2025, other markets did better. Given concerns over high valuations in the S&P 500 and the fact that a global passive approach now holds around 70% of its assets in US stocks, a growing number of investors may find themselves drawn towards a more diversified regional approach to manage risk.”
