Investment Style
In the context of stock mutual fund investing, refers to using one of three possible approaches -- investing in value stocks, growth stocks, or a blend of value and growth stocks - to create a fund portfolio. Investopedia Says:
Value stocks are perceived to be less risky than growth stocks, which makes the blend investing style a compromise of the two. Investment style, along with company size, is the basic determinant of a fund portfolio's asset allocation and risk-return parameters.
Fund investors should look for a high degree of consistency in a fund's investment style. Frequent changes could be an indication of the fund's investment manager chasing performance, which surely involves increasing risk. Related Terms:
Blend Fund
Growth Stock
Investment Objective
Portfolio Management
Risk Tolerance
Value Stock Investment Style
The overarching strategy or theory used by either a retail investor or an institutional money manager to set asset allocation and choose individual securities for investment. The investment style of a fund helps set expectations for long-term performance potential and aids in advertising the fund to investors looking for a specific type of market exposure. Investopedia Says:
Most mutual funds and exchange-traded funds (ETFs) employ a consistent investment style. An investment style can be broadly drawn, such as "international bonds", or finely tuned, such as "mid-cap value stocks that pay steady income".
With the majority of mutual funds and ETFs, managers are limited by their prospectus as to what kind of securities they may own. The portfolio managers of a healthcare fund, for example, must be invested in only healthcare-related companies, even if they don't feel the sector is a good place to be.
No one investment style is inherently better than another; the key is to find a style that suits an investor's appetite for risk while remaining a sufficient level of diversification. Related Terms:
Bottom-Up Investing
MSCI Emerging Markets Index
Swing Trading
Top-Down Investing
Value Investing |