What Is Style?

Style refers to the investment approach or objective that a fund manager uses. Style guides how a fund manager selects securities for the fund's portfolio based on their knowledge, skill, and understanding of the market. While there are a variety of styles, there are nine basic investing styles for both equity and fixed-income funds. For stock funds, company size and value/growth characteristic𓆉s determine the style. For bonds, style is defined by maturities and credit quality.

Understanding Style

The nine basic investment styles are:

• Large value
• Large blend
• Large growth
• Medium value
• Medium blend
• Medium growth
• Small value
• Small blend
• Small growth

The style of equity investments is determined by size and value/growth characteristics. The specific size parameters for stocks are large-, mid-, and small-size companies, which are determined by 澳洲幸运5官方开奖结果体彩网:market capitalization. Value, growth🃏, and neutral are the three basic value/growth categories for stocks.

The style of 澳洲幸运5官方开奖结果体彩网:fixed-income investments is determined by terms and credit. Bond maturities are categorized as short-term, intermediate-term, and long-term. Credit quality is determined by a bond's status as a government or agency issue and credit ratings for corporates and municipals of 'AAA' to 'AA' (high), 'A' to 'BBB' (medium), and 'BB' to 'C' (low). These ratings are most commonly classified as 澳洲幸运5官方开奖结果体彩网:investment grade or non-investment grade. With fixed-income investments, portfolio managers may also try to increase or decrease 澳洲幸运5官方开奖结果体彩网:interest-rate sensitivity to profit from their interest rate and yield-curve outlooks. This👍 is considered a style or method of fixed income investing.

Variation🌜s and combinations of these basic categories, as well as consideration of special industries, ind🐽ustry sectors, and geographic location, create investment styles for both stock and bond funds beyond the basic nine categories for each.

The invest๊ment style that an investment manager chooses to utilize in their fund is based on their knowledge of the above characteristics. The style they implement in their fund usually never changes, as th♌at is the reason investors choose that specific fund.

Style Disclosure

Funds managed by all types of investment managers in the investment industry include investment documents that provide in-depth details on a fund’s investment style. Registered funds are more transparent, as directed by the 澳洲幸运5官方开奖结果体彩网:Securities Act of 1933 and the澳洲幸运5官方开奖结果体彩网: Investment Company Act of 1940. Hedge funds and other alternative funds will also provide investment style disclosures in various forms for their invℱestors🙈.

In the registered universe, funds must file a 澳洲幸运5官方开奖结果体彩网:prospectus and statement of additional information with their registration. A fund’s prospectus is typically the primary source of information ꧋for investors seeking to understand a fund’s investment style. Along♋ with investment style, the prospectus will also disclose details about the levels of risk an investor can expect with the fund, fees, expenses, performance, and the types of investors who would find the fund to be the best fit.

If the investment manager decides that they will change the style of the fund, then this needs to be conveyed to the investors well in advance of doing so; giving the investors enough time to redeem their money💧 if they no longer𓂃 wish to invest in that style.

Evaluating Style

The easiest way to evaluate an investment manager's style is to look at the performance of the fund. If the fund is consistently generating positive returns, it is clear the investment manager is skilled and the chosen investment style is working.

It is important to assess the performance of a fund over a long period of time to ensure that the fund has operated through many 澳洲幸运5官方开奖结果体彩网:business cycles. It can be easier for a fund to perform well for one year in a booming economy, but how will that fund perform when the economy enters a 澳洲幸运5官方开奖结果体彩网:recession? Evaluating the investment style over a longer෴ period of time can indicate ho💞w the manager will handle tough times in the economy.

There are also many financial services firms that evaluate funds and their investment styles, assessing many factors and providing ratings. One of the most popular companies that analyzes and ranks funds is 澳洲幸运5官方开奖结果体彩网:Morningstar.