Mutual funds remain one of the most popular and widely used investment vehicles, and the thousands of funds available use a wide variety of investment strategies. Investors can easily search for various types of funds, such as growth funds or index funds, and then examine the prospectus of a mutual fund to learn the specific investment goals and trading approach employed by the fund manager. Individual investors can look for mutual funds that follow a certain investment strategy that the investor prefers, or apply an investment strategy themselves by purchasing shares in funds that fit the criteria of a chosen strategy.

Value Investing

Value investing, popularized by Ben Graham in the 1930s, is one of the most well-established, widely used and respected stock market investing strategies. Buying stocks during the Great Depression, Graham was focused on identifying companies with genuine value and whose stock prices were either undervalued, or at the very least not overinflated and therefore not easily prone to a dramatic fall. The classic value investing metric used to identify undervalued stocks is the price-to-book (P/B) ratio. Value investors prefer to see P/B ratios at least below 3, and ideally below 1. However, since the average P/B ratio can vary significantly sectors and industries, analysts commonly evaluate a company's P/B value in relation to that of similar companies engaged in the same business.

While mutual funds themselves do not technically have P/B ratios, the average weighted P/B ratio for the stocks that a mutual fund holds in its portfolio can be found at various mutual fund information sites, such as Morningstar.com. There are hundreds, if not thousands, of mutual funds that identify themselves as value funds or that clearly state in their descriptions that value investing principles guide the fund manager's stock selections.

Value investing goes beyond only considering a company's P/B value. A company's value may exist in the form of having strong cash flows and relatively little debt. Another source of value is in the specific products and services that a company offers, and how they are projected to perform in the marketplace. Brand name recognition, while not precisely measurable in dollars and cents, represents a potential value for a company, and a point of reference for concluding that the market price of a company's stock is currently undervalued as compared to the true value of the company and its operations. Virtually any advantage a company has over its competitors or within the economy as a whole provides a source of value. Value investors are likely to scrutinize the relative values of the individual stocks that make up a mutual fund's portfolio.

Contrarian Investing

Contrarian investors go against the prevailing market sentiment or trend. A classic example of contrarian investing is selling short, or at least avoiding buying, the stocks of an industry when investment analysts across the board are virtually all projecting above-average gains for companies operating in the specified industry. In short, contrarians often buy what the majority of investors are selling, and sell what the majority of investors are buying.

Because contrarian investors typically buy stocks that are out of favor or whose prices have declined, contrarian investing can be seen as similar to value investing. However, contrarian trading strategies tend to be driven more by market sentiment factors than are value investing strategies, and to rely less on specific fundamental analysis metrics such as the P/B ratio.

Contrarian investing is often misunderstood as consisting of simply selling stocks or funds that are going up and buying stocks or funds that are going down, but that is a misleading oversimplification. Contrarians are often more likely to go against prevailing opinions than to go against prevailing price trends. A contrarian move is to buy into a stock or fund whose price is rising despite continuous and widespread market opinion that the price should be falling.

There are plenty of mutual funds that can be identified as contrarian funds. Investors can seek out contrarian-style funds to invest in, or they can employ a contrarian mutual fund trading strategy by selecting mutual funds to invest in using contrarian investment principles. Contrarian mutual fund investors seek out mutual funds to invest in that hold the stocks of companies in sectors or industries that are currently out of favor with market analysts, or they look for funds invested in sectors or industries that have underperformed compared to the overall market. A contrarian's attitude toward a sector that has been underperforming for several years may well be that the protracted period of time over which the sector's stocks have been performing poorly in relation to the overall market average only makes it more probable that the sector will soon begin to experience a reversal of fortune to the upside.

Momentum Investing

Momentum investing aims to profit from following strong existing trends. Momentum investing is closely related to a growth investing approach. Metrics considered in evaluating the strength of a mutual fund's price momentum include the weighted average price-earnings to growth (PEG) ratio of the fund's portfolio holdings, or the percentage year over year increase in the fund's net asset value (NAV).

Appropriate mutual funds for investors seeking to employ a momentum investing strategy can be identified by fund descriptions where the fund manager clearly states that momentum is a primary factor in his selection of stocks for the fund's portfolio. Investors wishing to follow market momentum through mutual fund investments can analyze the momentum performance of various funds and make fund selections accordingly. A momentum trader may look for funds with accelerating profits over a span of time; for example, funds with NAVS that rose by 3% three years ago, by 5% the following year and by 7% in the most recent year.

Momentum investors may also seek to identify specific sectors or industries that are demonstrating clear evidence of a strong momentum. After identifying the strongest industries, they invest in funds that offer the most advantageous exposure to companies engaged in those industries.

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