Different investment styles fall in and out of favour in the stock market. For the past decade, “growth” investing has been the best place to be, as low interest rates have benefited fast-growing companies, especially in the technology sector. But as interest rates rise, the stock market’s most successful investment strategy may falter over the next few years. 

James Harley*, a 28-year-old from London who works in media, wants to know how concerned he should be by this “rotation” away from growth. 

He said: “There’s been a lot of advice to pivot towards cheaper stocks over the next few years,” he said. “Some experts expect growth to underperform. Is this an issue considering I plan to invest for decades?” 

Mr Harley set up his portfolio in March last year, investing predominantly in high-growth areas such as smaller companies and private equity trusts that specialise in technology. 

Barry Cowen, senior fund manager at Sanlam Wealth

We would certainly advocate an element of “value” stocks being in the portfolio. This should be on a long-term basis, as the best of the value rotation may be behind us.

The Invesco UK Opportunities fund looks compelling. It has significant exposure to financials and commodities. While these were out of favour for many years, their defensive valuations have helped protect investors during recent market setbacks, but also provided an attractive boost in late 2020 into 2021 when the Covid recovery saw the fund rally sharply. The fund returned 27pc in 2021. 

Thinking globally and more sustainably, Schroder Global Sustainable Value avoids commodity firms but likes cheap, out of favour businesses which it believes can be turned around. This means some exposure to financials, healthcare and technology via the likes of Standard Chartered, IBM and Intel. These businesses can still offer great long-term returns from a low cost base. The fund returned 27pc in 2021. 

Finally, Mr Harley could invest more in the American stock market through a fund like Legg Mason Royce US Small Cap Opportunity. This has broad exposure to the cheapest US small companies. 

Mr Harley’s biggest holding, the iShares MSCI Quality tracker, only returned 24pc in 2021. By focusing solely on growth and quality, investors can miss great opportunities elsewhere in the market. Mr Harley can capture the benefits of this investing style, while moderating risk, by diversifying his portfolio and placing more of his wealth in value firms.