In the world of investing, not all equities are created equal and not all investors think alike. While many investors focus on asset classes or sectors, professional portfolio managers often focus on investment styles. These styles, such as growth, value, quality, and momentum, reflect different philosophies about what drives returns and when. 

Understanding these investment styles can help high net worth investors make better informed choices when constructing portfolios, selecting managers, or interpreting short term performance differences. 

What Is an Investment Style? 

An investment style is a systematic approach to selecting securities based on shared characteristics. These styles reflect different beliefs about how markets work and when certain types of companies are likely to outperform. 

Think of them like different lenses for evaluating the same market: 

• Growth investors focus on potential 

• Value investors focus on price 

• Quality investors focus on fundamentals 

• Momentum investors focus on recent performance 

Many managers use a blend of styles, but understanding the underlying framework helps clarify what you are invested in and why it behaves the way it does. 

1. Growth Investing: Backing the Future Winners

Definition: Growth investors look for companies that are expected to grow earnings faster than the market average. These businesses often reinvest profits rather than pay dividends. 

Typical Traits: 

• High revenue and earnings growth 

• High price to earnings (P/E) or price to sales (P/S) ratios 

• Often in tech, biotech, or consumer sectors 

• Less emphasis on current valuation; focus is on future potential 

Example:
Investing in a company like NVIDIA (AI chips) or Afterpay in its early days — fast growing, disruptive, not always profitable 

When It Outperforms: 

• During periods of low interest rates 

• When economic growth is strong and investor optimism is high 

• In early bull markets when risk appetite is elevated 

Risks: 

• High expectations may not be met 

• Share prices can fall sharply if growth slows 

• Often more volatile than the broader market 

2. Value Investing: Buying $1 for 80 Cents

Definition: Value investors seek companies that are undervalued relative to fundamentals, believing the market will eventually correct the mispricing. 

Typical Traits: 

• Low P/E, P/B (price to book), or EV/EBITDA ratios 

• Often mature companies in cyclical industries 

• May pay strong dividends 

• Sometimes have temporary issues or negative sentiment 

Example:
Buying BHP during a commodity slump or Westpac after a regulatory fine — both had strong fundamentals but were trading at depressed prices 

When It Outperforms: 

• During economic recoveries 

• When interest rates rise and growth stocks are re rated 

• In markets where mean reversion dominates sentiment 

Risks: 

• Some “cheap” stocks are value traps 

• May underperform for long periods if sentiment never improves 

• Often tied to cyclical sectors (energy, financials, industrials) 

3. Quality Investing: Paying for Resilience

Definition: Quality investors look for businesses with strong balance sheets, consistent earnings, and defensible competitive advantages even if they are not cheap. 

Typical Traits: 

• High return on equity (ROE) and stable margins 

• Low debt and strong cash flow 

• Reliable management and governance 

• Less sensitivity to economic cycles 

Example:
Companies like Microsoft, CSL, or Nestlé are known for durable earnings, global brand strength, and conservative financials. 

When It Outperforms: 

• In late cycle markets or during downturns 

• When investors seek capital preservation 

• During periods of uncertainty or volatility 

Risks: 

• Can be expensive (quality often overlaps with growth) 

• May lag during “risk on” rallies or strong economic expansions 

4. Momentum Investing: Riding the Wave

Definition: Momentum investors look for stocks that are trending upwards, based on the idea that winners tend to keep winning in the short term. 

Typical Traits: 

• Strong recent share price performance (3 to 12 months) 

• Often associated with strong earnings surprises or positive news flow 

• Tactical, data driven, and turnover heavy strategies 

Example:
A fund that rotates into the top performing ASX stocks each quarter, based on recent price action. 

When It Outperforms: 

• In bull markets with clear trends 

• When investor sentiment is strong and liquidity is abundant 

• Often during mid to late cycle expansions 

Risks: 

• Performance can reverse sharply during corrections 

• High turnover and transaction costs 

• Can chase hype or unsustainable rallies 

How Styles Interact in a Portfolio 

Each investment style has its strengths and weaknesses. No style outperforms in all market conditions. Therefore, many institutional portfolios and multi manager strategies deliberately blend styles to reduce volatility and smooth performance over time. 

For example: 

• Growth and Value often move inversely 

• Quality can provide defensive ballast 

• Momentum adds short term agility but needs risk management 

Style Rotation: Why Timing Matters 

Just as sectors rotate, so do investment styles. History shows clear periods of style leadership: 

Recognising where we are in the cycle can help investors tilt their portfolios or choose fund managers whose style is aligned to the environment. 

Conclusion 

Investment styles are not just academic terms — they have practical consequences for performance, risk, and investor experience. By understanding what each style seeks, when it tends to outperform, and how it fits into a broader portfolio, investors can make more informed decisions. 

Whether selecting managers, rebalancing portfolios, or interpreting quarterly performance, knowing your style exposure can turn market noise into actionable insight. 

Our individually managed portfolios incorporate all of these investment styles, with allocations tailored to your specific goals, circumstances, and the broader market cycle. Each style can offer advantages at different points in the economic cycle, and our approach ensures your portfolio is positioned to adapt accordingly. If you would like to explore how your investment portfolio could benefit from enhanced diversification within the equity allocation, we would be pleased to discuss this further. Alternatively, if you would simply like to better understand the concepts outlined in this article or see how particular equities are classified across these styles, we are always happy to assist.