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Mutual Fund Investment Styles

Mutual fund Investment styles govern the way a fund makes investment decisions, which stocks it buys, and ultimately how it performs. Fund managers generally employ more than one style, combining elements of different ones to form a unique style of their own.

Active vs. Passive: While active investors believe in their ability to outperform the market by actively selecting securities, passive investors believe in investing in a market index for long-term results.

Growth vs. Value: Proponents of growth-style seek companies with growth potential — typically with a high P/E ratio — while value-style investors look for cheap stocks at the low end of their business cycle.

Target Date: Target date funds are managed so that the fund's asset allocation is rebalanced over time, generally growing more conservative as your "target date" -- typically a specific year -- approaches.

Sector: Sector funds focus on companies in specific business sectors.

Fund investors should ask questions, carefully read the fund prospectus, and consult fund rating services to make sure they are buying a style that is right for them.

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