Momentum Investing in Australia 2025: Strategies, Trends & Risks

Momentum investing has long been a favourite for traders who chase trends, but in 2025, its relevance in Australia is surging. With ASX volatility, global tech rallies, and a fresh wave of retail investors, momentum strategies are seeing renewed interest. But what does momentum really mean for Aussie portfolios—and how can everyday investors harness its power without taking on outsized risk?

What is Momentum Investing?

Momentum investing is a strategy where investors buy assets that have performed well recently, betting that those trends will continue. In practice, this means riding the wave of rising (or falling) prices, often over a period of weeks or months. The basic idea: stocks that have gone up will keep going up, and those that have dropped will keep dropping—at least for a while.

For Australians, this approach can be applied to ASX-listed shares, ETFs, or even global markets via online brokers. In 2025, with market sentiment shifting rapidly due to RBA policy changes and international tech booms, momentum strategies are on the radar of both seasoned and new investors.

• Short-term vs long-term: Some momentum traders look for quick gains over days or weeks, while others hold positions for months.
• Tools of the trade: Momentum investors often use technical indicators like moving averages, relative strength index (RSI), and volume spikes to spot potential opportunities.
• Psychology matters: Momentum relies on investor behaviour—fear, greed, and herd mentality can drive trends further than fundamentals might suggest.

2025 Trends: Why Momentum Is Back in Focus

The Australian financial landscape has shifted dramatically in recent years. The RBA’s latest rate cuts in early 2025 have pushed investors to seek higher returns in equities, driving up volumes on the ASX. Meanwhile, global tech stocks—especially AI, green energy, and semiconductor names—are hitting new highs, attracting Australian capital via ETFs and online platforms.

Several factors are fuelling momentum’s comeback:

• AI-powered trading platforms: More brokers now offer automated tools that identify momentum plays, democratising access for retail investors.
• ETF innovation: Funds like the BetaShares Australian Momentum ETF (AUMO) and global momentum ETFs are gathering assets, making it easier to get diversified exposure.
• Market volatility: Ongoing geopolitical tensions and sector rotations are creating strong, sustained trends that momentum investors seek to exploit.
• Policy tailwinds: The 2025 Federal Budget included incentives for tech and renewable investments, further amplifying sector-specific momentum.

For example, shares in Australian lithium producers surged over 30% in Q1 2025 following government announcements supporting EV supply chains. Momentum investors who caught the trend early booked sizable gains—though latecomers faced sharp corrections as profit-taking set in.

Risks and Realities: Not All Waves Last

Momentum investing can be lucrative, but it comes with real risks. The same forces that drive prices higher can reverse sharply. In 2025, some high-flying ASX small caps saw double-digit declines in days as sentiment shifted or company news broke.

Key risks for Australian momentum investors include:

• Sharp reversals: Trends can end abruptly, especially around earnings reports, RBA decisions, or global news events.
• Chasing hype: Jumping in too late means buying at inflated prices, increasing the risk of a pullback.
• Overtrading: Frequent buying and selling racks up brokerage fees and can erode gains—especially for retail investors.
• Tax impacts: Short-term capital gains are taxed at your marginal rate in Australia, which can eat into profits for active traders.

Smart momentum investors set clear entry and exit rules, use stop-loss orders, and stick to position sizing that protects their portfolio from single-stock blowups.

How to Get Started with Momentum in 2025

If you’re keen to explore momentum investing this year, consider these steps:

• Research ASX and global momentum ETFs for diversified, rules-based exposure.
• Test strategies with paper trading or a small allocation before committing significant capital.
• Stay informed on RBA policy and sector trends—momentum thrives on news and sentiment shifts.
• Monitor your trades and review performance regularly to avoid emotional decision-making.

With the right tools and discipline, momentum investing can add a dynamic edge to your portfolio—but it’s never a set-and-forget strategy.