Investment Style

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.


BREAKING DOWN '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. Investing Style

    In the context of stock mutual fund investing, refers to using ...
  2. Diversified Common Stock Fund

    A mutual fund that invests its assets in a relatively large number ...
  3. Closed Fund

    A mutual fund that has been closed - either temporarily or permanently ...
  4. Style Box

    Created by Morningstar, a style box is designed to visually represent ...
  5. Equity Fund

    A mutual fund that invests principally in stocks. It can be actively ...
  6. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
Related Articles
  1. Bonds & Fixed Income

    Is Your Investing Style Hot, Or Not?

    Don't let your portfolio construction fall out of fashion.
  2. 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.
  3. Mutual Funds & ETFs

    Understanding The Mutual Fund Style Box

    Evaluate your investments with this simple tool.
  4. Brokers

    6 Investment Styles: Which Fits You?

    How you invest is just as important as what you buy. Find out which style is right for you, and how to follow it.
  5. Mutual Funds & ETFs

    A Fund's Investment Objective

    Learn to evaluate a fund's investment objective, or "style".
  6. Mutual Funds & ETFs

    Mutual Fund Categories

    By Richard Loth (Contact | Biography)"Mutual funds aren't horses. You don't pick them by name, color or the celebrity who is involved in the ownership group." - Chuck Jaffe, MarketWatch.com, ...
  7. Trading Strategies

    Active Managers' Market-Beating Claims Debunked

    New, more precise mutual fund style analysis shows active management still underperforms over time.
  8. Mutual Funds & ETFs

    How's Your Mutual Fund Really Doing?

    Determine how fund managers are doing by sizing them up against their peers.
  9. Retirement

    Too Many Mutual Funds?

    Is there a magic number you should be aiming for? Find out here.
  10. Mutual Funds & ETFs

    Using ETFs To Build A Cost-Effective Portfolio

    ETFs are a viable alternative to mutual funds, but before you invest, there are a few things you should know.
RELATED FAQS
  1. How do I calculate the loan-to-value ratio using Excel?

    Learn what a mutual fund and a money market fund are, and understand the differences between each and how they serve various ... Read Answer >>
  2. What information does the SEC require in an investment company's prospectus?

    Understand the lengthy list of required information that investment companies such as mutual funds must include in a prospectus ... Read Answer >>
  3. What is the minimum amount of money that I can invest in a mutual fund?

    Learn about investing in mutual funds even with a smaller initial investment; there are many funds available to investors ... Read Answer >>
  4. What kinds of expenses are included in the expense ratio?

    Understand the variety of costs and charges that are included in the total expense ratio assessed to investors using mutual ... Read Answer >>
  5. Why have mutual funds become so popular?

    Learn why mutual funds are such a popular investment option, including the advantages of diversification, customizability ... Read Answer >>
  6. What is a long-short mutual fund?

    A Long-Short Fund is a mutual fund that holds investments long and in addition it sells securities it does not own (short). ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center