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. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  2. Value Investing

    The strategy of selecting stocks that trade for less than their ...
  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. Swing Trading

    A style of trading that attempts to capture gains in a stock ...
  6. MSCI Emerging Markets Index

    An index created by Morgan Stanley Capital International (MSCI) ...
Related Articles
  1. What Is Warren Buffett's Investing Style?
    Active Trading

    What Is Warren Buffett's Investing Style?

  2. Is Your Investing Style Hot, Or Not?
    Bonds & Fixed Income

    Is Your Investing Style Hot, Or Not?

  3. Which Mutual Fund Style Index Is For ...
    Mutual Funds & ETFs

    Which Mutual Fund Style Index Is For ...

  4. Understanding The Mutual Fund Style ...
    Mutual Funds & ETFs

    Understanding The Mutual Fund Style ...

Hot Definitions
  1. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  2. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  3. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  4. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  5. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
  6. Earnings Multiplier

    An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used ...
Trading Center