In the long-running debate over which is better growth or value, growth investing principles have been the clear winner in the past 15 years. However, so far in 2025 the FTSE 100 and European stocks have stolen a march on the tech heavy S&P 500. As this rotation accelerates, I am following Warren Buffett’s principles to help me weather heightened stock volatility.
Momentum investing
We have all heard the drumbeat many times before: buy the dip and don’t worry when stocks fall, as they always bounce back. This simple strategy has worked over and over again. But what do you do when this strategy stops working?
I am sure you have all heard the pun that its not the fall that kills you; it’s the sudden stop at the end. Momentum investing is a bit like this – trying to avoid hitting the ground, as if one does it’s game over.
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Rotation is coming
I genuinely believe that momentum investing is beginning to fade. The total dominance of US stocks recently is down to an infatuation with all things AI. As with the dotcom bubble before it, today any stock remotely connected with AI gets slapped on it a premium valuation.
One characteristic momentum investors don’t have is patience. How many of the private investors who piled into Nvidia after the release of DeepSeek shocked the world, are regretting their hasty move?
If the Magnificent 7 continue to underperform, I can see an eventual stampede for the exit.
I certainly don’t want to be around when that day comes. I am following Warren Buffett’s timeless principles. That means doing fundamental research and considering myself as a part owner of a business that I buy shares in.
A patient investor
The following, lesser known, quote by Warren Buffett’s has had a profound effect on my investing strategy
“Take the probability of loss times the amount of possible loss from the probability of gain times the amount of possible gain. That is what we’re trying to do. It’s imperfect, but that’s what it’s all about.”
In other words, you don’t have to be right all of the time, you just have to be right about your big bets at the right time.
One business that has grown to become one of the largest weighting in my Stocks and Shares ISA is insurance giant Aviva (LSE: AV.). I have been slowly building my stake here over the past five years. This was despite the consensus among analysts at the time of my initial investment being that it was one to avoid. Its share price is up 140% since then.
What gave me the confidence to initially buy and then keep adding, as funds became available, was because I had done my homework. My research had uncovered long-term structural growth drivers. These included ageing demographics and a pension provision ticking time bomb. But these trends don’t play out over years but a decade plus.
Along the way unexpected turns have occurred that were not on my radar. For example, the purchase of Direct Line Insurance. I’m trusting the company has made the right move there. But I won’t sell out whatever happens to the share price unless and until my original investment thesis fundamentally alters. I let my winners run.
