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Investors with a more conservative desire might find the Ice style appealing. By focusing on businesses that have shown consistent financial performance and growing dividends, we seek to beat the market with a mix of income and steadily rising share prices. We consider this to be a lower-risk investing strategy than Fire, but company and industry specific risks mean diversification remains important.

Ice investing can generate large, short-term gains on occasion, but we’re primarily seeking steady gains over time, and shallower declines during wider stock market falls. These qualities are most commonly found in established firms, but the Ice approach does not focus exclusively on large companies. We often see ample opportunity to invest in medium-sized companies, with strong niche positions in their industry and the ability to grow their dividends for years to come.

I’m targeting a large second income for when I eventually retire. So I invest the vast majority of my leftover cash each month in UK shares, trusts, and funds.

Like most people, I deposit some money in a savings account to provide a guaranteed return and give me funds for a rainy day. However, putting too much in a low-yielding cash product can also be high risk for those like me who are targeting a comfortable retirement.

Here’s why.

Cash returns

Today the best-paying, easy-access Cash ISA offers a 5.1% interest rate. That’s not bad, and certainly in the context of the poor rates that savers endured during the 2010s.

But parking all or most of one’s cash here could — depending on our investment goals — be a serious mistake.

On average, Brits currently save approximately £105.43 per month, according to personal finance website Finder. They also have £17,773 set aside in savings.

If someone parked this in a 5.1%-yielding Cash ISA, after 30 years they’d have £171,199 sitting in their account, excluding fees. If they then drew down 4% of this a year, they’d have an annual passive income of just £6,848, excluding the State Pension.

Given the rising cost of living and social care, it’s unlikely this will be enough to retire comfortably on. And what’s more, securing a 5.1% savings rate for the next three decades may be a tall order, depending on future interest rates.

A £17k+ passive income

Past performance is not a reliable guide to the future. However, the superior long-term returns of share investing since the mid-20th century suggest this could be a better option to consider to build wealth.

Let’s say an investor put £20 a month in that 5.1% Cash ISA, and the remaining £85.43 in a diversified mix of stocks, funds, and trusts in a Stocks and Shares ISA.

Based on a reasonable average annual return of 9%, and assuming that £17,773 of savings is also invested in the stock market, this investor could make £435,162 after 30 years.

A 4% drawdown in this situation would then provide an annual passive income of £17,406. These figures exclude broker fees.

A top trust

There’s no one answer to how much we’ll need to retire comfortably. This is highly subjective, while the future cost of living is also tough to predict.

But prioritising investing over saving can significantly improve one’s chances of building a decent nest egg. And one way to consider to achieve this is by investing in a fund.

The Xtrackers MSCI World Momentum ETF (LSE:XDEM), for instance, is a fund I’ve bought for my own portfolio. While it can go up and down in value according to economic conditions, its holdings in around 350 companies allows investors like me to spread risk while also targeting a large return.

Just under a quarter of the fund is sunk into high-growth information technology stocks like Nvidia and Apple. It also provides weighty exposure to the telecoms, financials, consumer goods, and industrials segments, reducing its dependence on one sector.

Since its launch in autumn 2014, this exchange-traded fund (ETF) has served up an average annual return of 11.52%. That’s higher than the 9% average that I mentioned above. If the fund continues to achieve a higher return, it would allow an investor to build a larger nest egg over time.

The volatile Burberry (LSE: BRBY) share price spiked up 10% on Friday (27 January). Christmas trading didn’t exactly set the world on fire, but I see cause for optimism.

Chief executive Joshua Schulman was upbeat about the company’s “It’s Always Burberry Weather” promotion and its “Wrapped in Burberry” festive campaign. But comparable Q3 store sales fell 4% below the same period a year ago. I found a 9% fall in Asia Pacific revenue of most concern. The Burberry brand has traditionally been very strong in China and the region.

The rising share price since September does hint at greater long-term growth hopes. We’re still looking at a 45% share price fall in the past five years, mind.

Reasons to be cheerful

The full year, with results due on 14 May, is still going to be a tough year of retrenchment. Burberry embarks on a “cost savings programme to unlock annualised savings of around £40m, with around £25m to be delivered in FY25, and of which £8m realised in H1 FY25“.

There’ll be restructuring costs too, estimated at around £20m for the full year. And the company has “suspended dividend payments in respect of FY25 in order to maintain a strong balance sheet and our capacity to invest in Burberry’s long-term growth“.

How soon might these actions bear fruit? This update suggests it could be sooner than we’d expected. It said: “In light of our Q3 performance, it is now more likely our second-half results will broadly offset the first-half adjusted operating loss, notwithstanding the uncertain macroeconomic environment.“

It can often take a fresh boss to really see what was going wrong with a company. They have the advantage of not being responsible for whatever that is. And they can take drastic action with no loss of face. So far, the market seems to be going along with the new CEO’s vision. But the shares have given up some of their gains to fall back 4% at the time of writing.

The rest of 2025

We need to be cautious. As the boss himself said, “it is still very early in our transformation and there remains much to do“. I’m wary of reading too much into early reports of a brightening outlook. How many times have I heard company management going on about transformations, early days, and a lot more to do? More than once, and it can often take longer than hoped.

The economic outlook doesn’t exactly make me envision vast hordes of shoppers rushing out to wrap themselves in Burberry. A lot could still go wrong, particularly internationally. Q3 sales in the Americas rose by 4%, but might threats of tariffs hit that? And those weak China sales are a concern.

I need to see full-year results, which we’ll have soon. But if the outlook for the coming 2025-26 year lives up to the optimism that investors seem to be feeling now, I think it might just mark the start of a sustained Burberry share price run.

Many FTSE investment trusts were trading sharply lower today (27 January). In the blue-chip index, Scottish Mortgage Investment Trust fell 5.5%, while a host of FTSE 250 funds also slumped.

The common theme here is that these are tech-focused trusts. They have varying degrees of exposure to Nvidia (NASDAQ: NVDA) and related artificial intelligence (AI) stocks, which are all down significantly in the pre-market over in New York.

As I write, the Nvidia share price is due to open 12% lower!

What on earth is going on?

Basically, a previously obscure Chinese start-up called DeepSeek has set the cat among the giant Nasdaq pigeons, tiggering what looks like a sizeable tech sell-off.

DeepSeek is a Chinese large language model (LLM) developer, similar to OpenAI’s ChatGPT. It released its R1 AI model on 20 January. However, it claims to have built this model far more cheaply, by using Nvidia’s less powerful H800 chips, as opposed to the tech giant’s top-shelf H100 version.

There are export restrictions on Nvidia’s H100 chips being sold in China, meaning scarcity might have sparked truly disruptive innovation.

Nvidia’s earnings growth is premised upon massive ongoing capital expenditure on AI infrastructure. Microsoft, for example, is planning to spend a colossal $80bn on AI in 2025. But apparently DeepSeek trained its latest top-performing model in two months for $5.6m — a fraction of the $100m-$1bn range cited by rival Anthropic last year. 

The Chinese app is currently at the top of Apple‘s App Store rankings. Venture capitalist veteran Marc Andreessen said that this is potentially “one of the most amazing and impressive breakthroughs I’ve ever seen”.

Doubts

If hundreds of billions of dollars of investment in high-end chips and extensive computing power isn’t necessary, then the potential risk to Nvidia’s growth seems obvious. But my suspicion is that there’s more than meets the eye here. There are already doubts about the true cost of training this LLM.

More to the point, surely executives and AI engineers at some of the best tech companies on earth haven’t been completely blindsided by the exact costs needed to train these models. Have they?

Potential buying opportunities ahead

So, might there be buying opportunities coming up? Potentially yes, as it appears the market is selling first and asking questions later.

When there is widespread selling like this, it can mean high-quality stocks end up on sale. The baby gets thrown out with the bathwater, as it were.

Allianz Technology Trust and Polar Capital Technology Trust might be worth considering if the selling gets worse. Each has diversified exposure to many unstoppable technology trends, including cloud computing, e-commerce, semiconductors, and cybersecurity.

Meanwhile, Scottish Mortgage appears to have been ahead of the curve, having significantly reduced its Nvidia holding in recent months. In November, manager Tom Slater said: “Companies must find ways to offer competitively priced AI systems while managing the skyrocketing costs of training them. This raises concerns about the sustainability of current capital equipment spending, including Nvidia chips.”

Perhaps this disruption is what is needed for AI to go truly mainstream.

We have Microsoft, Meta Platforms, and Tesla reporting earnings this week. It’ll be fascinating to hear what management says on this if asked, particularly shrinking violet Elon Musk.

The pound has fallen sharply against the US dollar in recent weeks. Many FTSE 250 stocks have been under pressure as investors worry about geopolitics, potential trade tariffs, and domestic growth.

The US dollar has continued to rise as investors bet that the US Federal Reserve will keep interest rates higher for longer. This, coupled with concerns over domestic economic growth in the UK, means we are seeing sterling under pressure.

However, when the pound weakens, UK companies with significant offshore earnings can do well. Trainline (LSE: TRN) is one of the FTSE 250 stocks that I think could be a beneficiary.

What does Trainline do?

Trainline is a leading online platform for train and coach ticketing services across Europe. While it has a strong presence in the UK, Europe represents a key growth market given the sheer number of journeys taken on the mainland.

In its half-year results to 31 August, Tranline reported an 18% increase in first half transactions to over 110m. This helped boost Trainline’s net ticket sales by 14% year on year to £3bn. Adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) grew by 44% to £82m. A growing share of the company’s revenue now comes from international markets, reducing its reliance on the UK economy.

Valuation

The company’s share price has been volatile over the past year, climbing 11.5% to £3.64 per share as I write on 27 January. The majority of those gains came in the final quarter following its results release, which included a second profit upgrade in the space of two months.

The company’s stock trades at a trailing price-to-earnings (P/E) ratio of around 31. That’s well above the FTSE 250 average of 13. I think the key here is how well the company can scale its business model and keep growing its revenues.

Beneficiary of weaker sterling?

Trainline is quite clearly focusing on Europe as a growth market. A significant portion of its revenue is generated in euros, which can translate into higher local currency revenue when sterling weakens.

Another defensive quality is the group’s relatively limited exposure to the US. While investors are concerned about tariffs and other barriers for foreign companies in the US under the new administration, I think Trainline is relatively well insulated from these.

Of course, it’s not all sunshine and rainbows. The company is consumer-facing and relies on the health of the consumer and travel industry. It continues to gain market share in the commuter segment, which is a positive, but there are large risks to growth from both consumer spending reductions and potential new regulations in the UK.

Verdict

Trainline’s international exposure and growth potential in Europe leave it well-placed to benefit from weaker sterling. However, the stock isn’t one that I’ll be buying right now.

The P/E ratio does look quite high enough given the consumer-facing nature of its operations and fierce competition. While weaker sterling is on my mind at the moment, I’m investing with at least a 3- to 5-year horizon. Given where I think we’re at in the economic cycle, I am looking for more defensive exposure in industries like pharmaceuticals when I get some spare funds.

Searching for cheap FTSE 100 stocks to buy? Here are three I think investors should seriously consider.

WPP

A case can be made that WPP (LSE:WPP) is one of the Footsie’s best bargains based on predicted earnings.

At 738p per share, it trades on a forward price-to-earnings (P/E) ratio of 8.4 times. This is based on forecast earnings of 87.6p per share in 2025, representing a 1% increase on last year’s expected earnings.

This isn’t to say that profits are guaranteed to rise this year and beyond. As a provider of advertising and marketing services, its earnings are highly sensitive to broader economic conditions. Promotional spending is one of the first things companies slash when times get tough.

However, WPP also has significant growth potential over the long term as the global economy expands. This is thanks to its market-leading offerings across the communications and advertising spectrum.

A strong balance sheet gives it scope to grow profits through further acquisition activity too. Its net debt-to-EBITDA ratio was a reasonable 1.6 times as of the halfway point of 2024.

Vodafone

Share pickers seeking strong paper value might also want to research Vodafone (LSE:VOD) today. The telecoms giant looks cheap based on predicted earnings and dividends, but this is not all.

With a price-to-book (P/B) value of below 1, at 0.8, its shares trade at a discount to the value of the company’s assets.

For 2025, Vodafone’s P/E ratio is 9.9 times, based on its current share price of 68.3p. And its corresponding dividend yield is a bulky 6.9%.

I’m not surprised on one hand by Vodafone’s cheap valuation. It’s slashed the dividend in response to help mend its balance sheet. And net debt remains high, at €31.8bn, fuelling market fears of further dividend cuts down the line..

But I also think Vodafone has significant long-term investment potential. Broadband and mobile services providers could profit handsomely as the digital economy rapidly grows. And Vodafone’s huge investment in 5G and fibre rollout could see it thrive in this landscape.

I also think the company’s operations in fast-growing African nations could prove highly lucrative.

F&C Investment Trust

At £11.56 per share, the F&C Investment Trust (LSE:FCIT) has risen sharply at the start of 2025. Yet it still trades at a near-10% discount to its net asset value (NAV) per share of £12.85.

Like other funds and trusts, it gives investors a chance to spread risk across a raft of companies (more than 400) in all. However, with a large weighting of US tech stocks, it could be in for a bumpy ride in the near term.

Less than sparkling results from the likes of Apple, Meta and Microsoft later this week could see the trust fall in value. In addition, fears concerns over Chinese company DeepSeek’s chatbot and its impact on the AI market may also push its price down.

Yet I believe these threats are baked into the trust’s low valuation. On balance, the tech market still looks in good shape for long-term growth as our lives become increasingly digitalised. What’s more, F&C Investment Trust’s diversification across many sectors helps to mitigate any tech-related stress.

Greggs (LSE: GRG) shares are all the rage. We see this on the Fool. Investors gobble up articles on the UK’s favourite bakery chain. Artificial intelligence (AI) has evidently taken note of its popularity.

This morning, I asked the AI chatbot to name 2 FTSE 250 stocks that look well placed to surge in value in 2025. Its first suggestion was fantasy games manufacturer Games Workshop. Since the stock entered the FTSE 100 in December, ChatGPT’s behind the times. As is often the case, in my experience.

Its second pick was good old Greggs. ChatGPT praised the group’s robust expansion as it increases store count and invest in online channels.

Is this FTSE 250 stock past its best?

There was no mention of the recent slowdown in sales, which made me wary. Then I discovered that the answer to my question was lifted from an article written in September and a lot’s changed since then.

Obviously, ChatGPT’s a computer programme rather than a stock tipster. And to be fair it’s the first to admit it. It’s fun to play with but must be treated with extreme caution. Right now, I’d say the same about investing in Greggs.

The shares had a brilliant run, thanks to a witty marketing drive that neatly positioned its sausage rolls and other pastry-based produce as a cheap treat in tricky times. Naughty but nice and nothing to be ashamed of.

As confidence grew, the board made ambitious plans to boost store count from 2,500 to 3,500, target evening openings, and pioneer outlets in railway stations, retail parks, airports and the like.

Revenues rocketed from £811m in 2021 to £1.8bn in 2023. No wonder investors loved it. On 9 January, we learned they topped £2bn in 2024. But there was a catch.

In the first half of last year, total like-for-like sales rose 13.8%. That slowed to 10.6% in Q3 and just 7.7% in Q4. Consumers are struggling right now, with the board blaming “more subdued high street footfall”.

Margins are being squeezed

As we know, the UK economy’s having a tough time. Growth has pretty much flatlined since the election, and a recession’s possible. Even Greggs will struggle to grow given the gloomy outlook for the high street. Budget employer’s national insurance and minimum wage hikes will squeeze margis.

The board’s ploughing on, with a strong pipeline of new shop openings, while shuttering underperformers to keep margins high. It’s also broadening its menu and enhancing digital capabilities, while working on its supply chain.

But analysts are forecasting sales growth of just 2.9% in the year ahead. If correct, that would mark a further slowdown.

On the plus side, the shares are cheaper. Last year, they had a price-to-earnings ratio of more than 22. That’s now slipped below 17 times.

Some far-sighted investors might consider this an opportunity to buy Greggs shares, which may recover when the economy does. I don’t think we’re there yet and will be shopping elsewhere for FTSE 250 bargains. Whatever ChatGPT ‘thinks’.

Investing in the FTSE shares can be a rewarding strategy for long-term gains. This is particularly true when focusing on well-established companies with strong fundamentals and promising growth prospects. 

With 2025 shaping up to be a volatile year for markets, investors may benefit from taking a cautious approach. Typically, this means avoiding high-risk and speculative assets in nascent industries like artificial intelligence (AI).

While the promise of high rewards is hard to ignore, history has shown that the excitement around such industries can quickly turn sour. With that in mind, I’ve identified two companies worth considering for more stable returns in 2025 and beyond.

BAE Systems

BAE System (LSE: BA.) is a leading UK-based aerospace and security company and the largest defence contractor in Europe. It designs and manufactures advanced technology-led solutions for companies the world over. It was formed 25 years ago as a merger between British Aerospace and an electronics subsidiary of General Electric. In that time, it’s grown to employ almost 100,000 people in more than 40 countries globally.

As a contractor it relies on government budgets, particularly US defence spending. This puts it at risk of short-term losses from policy decisions outside its control. More so, it if fails to innovate at the same rate as competitors, it risks losing contracts to other suppliers.

Revenue dipped slightly in 2018 but has been steadily increasing at a rate of 6.46% since, from £16.82bn to £23bn in 2023. Earnings have almost doubled in the same period, up from £1bn in 2018 to £1.86bn in 2023. Analysts are generally favourable about the stock’s prospects, with the average 12-month price target eyeing a 21.8% increase.

I already hold stock in the company and I think investors aiming for long-term growth could benefit from considering it.

Haleon

Haleon (LSE: HLN) was spun off from GSK in 2022 to allow the drugmaker to focus on pharmaceuticals. It’s now one of the largest consumer healthcare companies in the world, with listings on both the FTSE 100 and on New York Stock Exchange (NYSE).

Most people will know it by its popular brands such as Sensodyne, Panadol and Centrum. Since listing in 2022, its share price has climbed a decent 20%. 

But it faces stiff competition from multinational healthcare leaders including Colgate-Palmolive, Reckitt Benckiser and Unilever. It also risks losses if consumers opt for lower-cost alternatives, evidenced by a drop in demand for Panadol in late 2024.

The business already holds a lot of debt (£9.46bn) so it must remain competitive or risk defaulting on interest payments. It’s already taken steps to address these issues by selling off non-core brands and streamlining its portfolio. This could help it boost its core products and offer more competitive pricing.

Analysts forecast earnings to grow at a rate of 7.85% going forward, rising from 17p per share to 23p in 2027. Revenue’s expected to grow moderately slower, from £11.3bn to £12.68bn.

While Haleon doesn’t offer the same growth potential as BAE, it’s a more defensive stock. That adds stability to a portfolio as the company typically remains in high demand year-round. I’m yet to invest in the stock as I already hold shares in Reckitt and GSK. However, I think it’s a good long-term investment to consider and one I’ll be keeping an eye on this year.

Having a second cash flow stream that’s separate from an everyday job can be of great benefit to an investor. It provides funds to either reinvest in the stock market, or to use for other lifestyle choices. Whatever the reason, the focus to begin with is on finding a viable way to make the passive cash stream. Using income stocks can be just the ticket.

Weighing up the investment case

Income shares have pros and cons. One of the largest benefits is that the yield potential can exceed that of other traditional investments. For example, at the moment the highest dividend yield in the FTSE 100 is 10.49%. Although the current yield doesn’t mean it’ll stay this high in the future, it goes to show what can be achieved.

Another reason why some like income stocks is due to the flexibility in buying and selling. Unlike some other assets that can generate cash but can take months to sell (such as property), stocks can easily be traded each day. If an opportunity presents itself, a shrewd investor can jump on it straight away and own the stock the same day.

One risk is that dividends aren’t guaranteed. Unlike bond coupon payments, there’s no requirement from the CEO to pay shareholders a dividend. As a result, investors need to be careful about buying a stock under the illusion that future income is definitely going to be received. Should a business get in trouble, the dividend payment could be reduced.

One for consideration

With the aim of building a good pot of income, investors could consider buying HSBC (LSE:HSBA). The global bank has a yield of 6.01%, with the share price up 35% in the past year.

The business is benefitting from both higher revenues and also a drive for lower costs. The latest Q3 results showed revenue up 5% versus the same period last year. Factors that helped drive this included higher client activity in the Wealth Management division as well as volatile market conditions that boosted trading transactions.

At the same time, various reports have surfaced of a likely cost-cutting push this year. If this actually happens, overall profitability could improve, with the mix of rising revenue and falling costs. This could ultimately boost the earnings per share, helping to solidify the dividend payments.

Even though this sounds great, investors do need to be careful. A good chunk of revenue is based on interest income, which is sensitive to a change in interest rate. Should major central banks cut the base rate this year, this could cause interest income to fall.

Adding the figures up

If an investor considers putting £750 a month in dividend shares with an average yield of 6.5%, the investment pot could quickly start to build. If dividends were reinvested, this could compound growth even faster.

After 15 years, the pot could be worth £229.6k. The following year, this could generate £40.90 on average each day. Predicting income this far in advance isn’t an exact science. But it goes to show the potential that does exist with this strategy.