Investment Style

AAA

DEFINITION of '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 EXPLAINS 'Investment Style'

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
  1. Swing Trading

    A style of trading that attempts to capture gains in a stock ...
  2. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  3. Top-Down Investing

    An investment approach that involves looking at the "big picture" ...
  4. Bottom-Up Investing

    An investment approach that de-emphasizes the significance of ...
  5. Value Investing

    The strategy of selecting stocks that trade for less than their ...
  6. MSCI Emerging Markets Index

    An index created by Morgan Stanley Capital International (MSCI) ...
Related Articles
  1. Active Trading

    What Is Warren Buffett's Investing Style?

    Learn the main principles that Warren Buffet uses in assessing a company. His take on value investing may surprise you.
  2. Bonds & Fixed Income

    Is Your Investing Style Hot, Or Not?

    Don't let your portfolio construction fall out of fashion.
  3. Mutual Funds & ETFs

    Which Mutual Fund Style Index Is For You?

    The Russell Investments and MSCI Barra style classification systems can help you pick the right mutual fund - if you know how they work.
  4. Mutual Funds & ETFs

    Understanding The Mutual Fund Style Box

    Evaluate your investments with this simple tool.
  5. Retirement

    Where Top Down Meets Bottoms Up

    Find the investing "sweet spot" by combining these two styles.
  6. Investing

    Investing Strategies For The Millennial Generation

    Suggestions to build a long-term plan for the millennial generation, according to their needs and goals.
  7. Professionals

    How do companies measure labor supply in human resources planning?

    Find out how and why a company's human resources department would measure labor supply, and what policies would address a shortage or surplus.
  8. Fundamental Analysis

    Why are OTC (over-the-counter) transactions controversial?

    Learn more about over-the-counter transactions, and why OTC traders are considered riskier than traders working with larger market exchanges.
  9. Fundamental Analysis

    What is the difference between cost of equity and cost of capital?

    Read about some of the differences between a company's cost of equity and its cost of capital, two measures of its required returns on raised capital.
  10. Fundamental Analysis

    What is arbitrage pricing theory?

    Find out what arbitrage pricing theory is and how it can theoretically be used by investors to generate risk-free profit opportunities.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center