For Australians looking to maximise investment returns without succumbing to market timing, value averaging is gaining renewed interest in 2025. While dollar-cost averaging (DCA) has long been the go-to strategy for consistent investing, value averaging takes things a step further—offering disciplined contributions based on a targeted growth path. In a year marked by market volatility and evolving investor preferences, value averaging could be the edge you need for smarter wealth accumulation.
What is Value Averaging?
Value averaging is an investment strategy that adjusts your contributions based on your target portfolio value at each interval—typically monthly or quarterly. Unlike dollar-cost averaging, where you invest a fixed amount regardless of market conditions, value averaging requires you to invest more when prices are low and less (or even withdraw) when prices are high. The goal: keep your portfolio on a steady, predetermined growth trajectory.
For example, suppose you want your portfolio to grow by $1,000 each quarter. If your investments underperform and you only gain $500 in a quarter, you’d add $500 to make up the difference. If markets surge and your portfolio grows by $1,200, you’d actually withdraw $200 to stay on track.
- Disciplined investing: Forces you to buy more in downturns and less in rallies.
- Market responsiveness: Aligns contributions with actual performance, rather than a set-and-forget approach.
- Potentially higher returns: Research and historical data suggest value averaging can outperform DCA in certain market conditions.
How Value Averaging Works in Practice
Let’s break down a simple example using Australian ETFs in 2025. Suppose you’re aiming for a portfolio that grows by $10,000 per year, or about $833 per month. At the start of January, you invest $833. If by the end of February your portfolio is only worth $1,500 (due to a market dip), you’ll need to contribute $166 to hit the $1,666 target for two months. If the market rebounds and your portfolio jumps to $2,700 by the end of March (target was $2,499), you’d actually withdraw $201 to bring your balance in line.
This method requires more record-keeping and discipline than DCA, but it ensures you’re always buying more when markets are down and taking profits as they rise—an approach many investors struggle to implement emotionally.
Practical considerations for Australians in 2025:
- Many popular Australian brokers and platforms now offer tools to automate value averaging contributions.
- Transaction fees and tax implications: Frequent adjustments can trigger more trades, so consider brokerage costs and the potential for more realised gains or losses.
- Best suited for diversified portfolios, such as index funds, ETFs, or managed funds, where transaction costs are low and liquidity is high.
Pros, Cons, and 2025 Policy Updates
As of 2025, the Australian Securities and Investments Commission (ASIC) has issued new guidelines for retail investment platforms, encouraging greater transparency around automated investment strategies—including value averaging. This means more Australians have access to clear, data-driven insights into how these strategies perform over time.
Advantages:
- May enhance returns in volatile or sideways markets
- Reduces risk of investing too much at market peaks
- Promotes disciplined rebalancing and profit-taking
Drawbacks:
- More complex to track and execute than DCA
- Potentially higher transaction costs
- Less effective in steadily rising bull markets, where DCA may suffice
2025 Trends: With Australians increasingly turning to automated investment tools, many robo-advisers and platforms are now offering value averaging as an option alongside DCA. The Australian Taxation Office (ATO) has also clarified the capital gains implications of regular withdrawals, so investors should keep good records and use tax reporting tools provided by their brokers.
Is Value Averaging Right for You?
Value averaging isn’t for everyone. It demands more engagement and discipline, but for those willing to put in the effort—or who have access to automation tools—it can offer a smarter way to ride out the bumps and dips of the sharemarket. If you’re aiming for a long-term goal, like a house deposit, early retirement, or building a family trust, value averaging could help you stay on course and make volatility work in your favour.
