What top fundies learned in 2025, and how they'll act on it 2026

You can watch the video by clicking the player, listen to the podcast, or read an edited transcript below. These interviews were filmed on 9 December 2025.

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In a year as frantic and fluid as 2025, it can be hard to know what is a valuable learning experience and what is just noise.

But it goes without saying that eventful times in markets will always throw up the opportunity for some new lessons and some old lessons best relearned. 

As part of our 2026 Outlook Series, we asked 10 leading fund managers to share the key lesson they learnt in 2025 and how that's informing their approach going into 2026.

From trimming winners too early to working out how to play the big market shifts, these lessons from 2025 should help you become a better investor in the year ahead.

Our featured fund managers include (in order of appearance):

• Tim Carleton, Auscap Asset Management
• Ben Griffiths, Eley Griffiths
• James Abela, Fidelity International
• Anna Milne, Wilson Asset Management
• Arms Rosenberg, Minotaur
• Matthew Booker, Spheria Asset Management
• Joel Fleming, Yarra Capital Management
• Alan Pullen, Magellan
• Steve Johnson, Forager
• Dr David Allen, Plato Investment Management (written responses only - see below)

Note: We would like to thank the fund managers listed above for sharing their lessons from 2025 in the spirit of the Outlook Series. Please do your own research and seek advice from a professional before making any investment decisions of your own. Past performance is not a reliable indicator of future returns.

Edited transcript

Lesson #1 - Trimming winners too early

Tim Carleton: 2025 was really about trimming some of our winners too early. So we had some companies where you'd started to see earnings growth improve and really different parts of the business start to fire on all cylinders. And we were probably guilty of trimming some of those positions early in the year. 

So if I think about a company like Eagers (ASX: APE), they've had lots of things go right in 2025. We saw a cyclical trough in 2024 in the new car market. Their used car platform, easyauto123, has been kicking real goals this year. Their partnership with BYD has delivered strong results. And now they've entered into the Canadian market in a really sensible and measured fashion. 

And so as a result, when you see considerable earnings growth for a business, you'll often see multiple expansion with that. And we've probably been guilty in companies like Eagers of potentially trimming that position too early.

And it's an easy mistake to make, because as the position is going well, it's becoming a bigger part of the portfolio, which means that the volatility performance becomes more dependent on the daily swings in these larger positions. But you just have to remember that when a company is doing well, it's very unlikely that you're going to see material share price deterioration in that sort of environment.

Lesson #2 - The importance of liquidity 

Ben Griffiths: One thing I've learned on the journey as an investor is there are three key variables that drive stock prices. Liquidity one, earnings two, and dividends three. And it's really been watching liquidity on show this year that's reminded me that investor interest is strong in certain pockets and nowhere stronger than in small caps. Where daily turnovers in the Australian share market are strong and small cap turnovers are approximating about 20% of total turnover.

A decade ago, small caps would account for 10%. And why is that? It's because there's a whole lot of money trying to find a warm spot. And that warm spot is small caps and mid caps where there's superior earnings on show and superior earnings available for 2026. You pay 20 times for both small and large industrial earnings. That's the PE for both those indices. For smalls, you'll pay 20 times and get 16% earnings per share growth in 2026. If you go to mid caps, you'll pay 20 times and get 6%. So liquidity has found the warm spot and that's earnings conviction.

Lesson #3 - The risk of extrapolation

James Abela: The lesson is extrapolation and the risk of extrapolation. Because of the strength of the market in resources, technology, and defence - the market got very excited about all these things during 2025. We saw stocks like Temple & Webster - down 30%, DroneShield - down 60%, and some resources stocks down 20 or 30%. The market got excited about certain clusters of momentum, but when the stocks disappointed, the downside was quite large.

I think there may be a risk if you extrapolate the excitement of 2025 through into 2026. We've already seen some signs that we should be careful about extrapolating that excitement in growth or momentum. I think investors should keep an eye on earnings and watch expectations where they are, because it was at a very high level during 2025 and leading into 2026, I imagine, after some pretty strong years, that extrapolation and enthusiasm is going to be tempered somewhat in 2026.

Lesson #4 - Positioning as markets swing

Anna Milne: There was so many chapters of 2025. If we focus on the most recent history, in the last few months, we've seen a real change in market leadership. For the last few years, quality, growth, and momentum have been the names of the game. These are the factors that have outperformed every other factor, but that's changed in recent months. We've actually seen the likes of value and short interest come to the fore. 

Now we believe that the market pendulum swung so far that one way towards growth and momentum. It could swing back a fair way over the months and the year ahead. So how do we position for that? We're looking for companies that are cyclical with strong cash flows, dividends, and dare I say it, some value.

Lesson #5 - Adaptability, diversification and AI

Armina Rosenberg: I think there's three things that we learned this year actually. So I'd say adaptability, diversification, and of course the use of AI. 

On the first point of adaptability, there's obviously been lots of headlines. We talked about how we should let the headlines wash over us, but we should adapt our thesis when it makes sense when the facts change. And we did that this year, I think, pretty well. 

It was also helped by diversification. You had things like geopolitical shocks, we had some idiosyncratic stock blowups, policy changes at the last minute courtesy of Trump. These things are really hard to predict and the best way to fight them is to be diversified. So we're pretty broad across countries, across sectors, across factors, you name it. And I think that diversification really helped us this year. 

And then of course, it would be remiss of me not to mention that I think AI usage, particularly as it pertains to the fundamental investment process, that really played out this year. And interestingly, we thought that was going to help with the beginning parts of the journey. So things like idea generation and forming a quick view on the company. This year we actually saw it go deeper into our investigative work. So that real fundamental analysis, AI really helped there. 

We actually have AI agents now who do 24/7 monitoring on every position in our portfolio. So that's been a major game changer. And those three things, adaptability, diversification and use of AI, they're things we're going to double down on into 2026.

Lesson #6 - Maintaining valuation discipline

Matthew Booker: 2025 was an interesting year because it started off pretty hot and it was the same trends. Money was going into large cap, it was going into banks, it was going into tech and growth companies, and then suddenly it hit a brick wall and it all sold off into April and then there was a big rebound, but that rebound didn't hold. And what we've seen later in the year is we've seen a big switch into, I think, more valuation sensible type names, and that is obviously positive for us. So there's been a big rotation. 

We're hoping that rotation continues. I guess, what did I learn from that? I learned that there can be big shifts in the market and you can get really caught out if you don't have valuation discipline in what you do. So I think the fact that we do valuations for our companies is really important and also that they make sense.

Lesson #7 - Keeping an open mind 

Joel Fleming: Yeah, really good question. I mean, we have an investment process and we apply that, but again, it's about making sure you let those winners run - those compounders - and you don't jump off too early. And also where we make mistakes, that idea of cutting them early because that's where the problems in the portfolio occur. So that's a continual focus of the fund. 

For me, it's also the world's starting to change pretty quickly. We've got to be across a number of new sectors, and you've got to look at these opportunities and spend the time doing it. So making sure we've got an open mind and we're actually exploring some of these changes in consumer behaviour, technology, how things are evolving and making sure that we're just not saying no to things because we don't understand.

Lesson #8 - Remaining disciplined

Alan Pullen: Well, actually it taught me that sticking to your discipline and process is more important than ever. We saw markets somewhat driven by speculative forces in 2025. We saw unprofitable tech and lower quality companies performing well off narrative. 

And I think what's really important is, as an investor, remembering what you do as part of your process and sticking through that discipline, even when markets might be disagreeing with you for a little while, because if your process is proven, it will outperform over the long term. So stick to your process. This is the opposite to your question, right? I learned that discipline and processes is more important than ever.

Lesson #9 - The impact of passive investment

Steve Johnson: The passive impact on markets is just becoming more and more significant. And the big lesson for us is to keep incorporating that into our process. We want to buy cheap stocks, so looking for things that are falling out the bottom of the index and getting all that passive selling is a great source of opportunities. 

And then on the upside, when you get something right, being really cognisant about where it is in that into-the-index or out-of-the-index dynamic can really help you make more on the upside as well. So we've factored that into our process already and we'll be doing more of that in 2026.

Lesson #10 - Reaffirming some investing truisms

Dr David Allen: 2025 reaffirmed our belief in two investment truisms: “Time in the market beats timing the market" and “Diversification is the only free lunch." 

When President Trump announced his “Liberation Day” tariffs, uncertainty spiked and equity markets fell sharply, with the S&P 500 declining 20% in just three weeks. It was understandably tempting to move to cash, and many investors did. We stayed invested — and have since benefited from a roughly 40% rally in the S&P 500.

Dispersion in stock returns is now at record levels. The rapid rise of AI, combined with heightened geopolitical and macroeconomic shocks, has created a widening gap between winners and losers. In this environment, diversification is not just prudent — it is essential, and more valuable than ever.

The late, great Charlie Munger coined the term “diworsification,” while Andrew Carnegie famously advised investors to “put all your eggs in one basket — and then watch that basket.” Concentration can indeed pay off handsomely when the right stocks are chosen. Equally, it can end in tears if those choices are wrong — or if luck simply turns against you.

What is the most important investing lesson you learned in 2025? 

Was there a key learning experience for you this year? Let us know in the comments below.