Scoring Investment Style Data
AAA
  1. Mutual Fund Categories
  2. Mutual Fund Style Box
  3. Fund I-Q Number 1: Investing Style
  4. Scoring Investment Style Data
Scoring Investment Style Data

Scoring Investment Style Data

By Richard Loth (Contact | Biography)

This is the entry we need to complete in the Fund Investment-Quality Scorecard for an analysis of a mutual fund's investing style:



When seeking the information needed to complete the scorecard, Morningstar's fund report shows a fund's stated style in the "Master Category" box in the upper right-hand corner of its report. Its take on a fund's current style is disclosed in the "Current Investment Style" section, which also provides a fund style box graphic, value measures and growth measures. Lastly, year-to-year style changes are clearly seen in its multi-year style box graphics at the top of the report.

Value Line's report has its version, which differs from the norm, of a style box that only provides a fund's current categorization.

Making a style drift analysis decision is an empirical exercise. There is no doubt that a consistent investment style over many years is a solid fund investment quality. However, some style drift over an extended period of time is not an unusual occurrence, and should not be viewed too harshly. A fund's investment style behavior should not be looked at in isolation. Investors should also look at turnover, management tenure and total return results. If these investment qualities are positive, some style drift is easily tolerated. In other words, fund style changes are often acceptable when when management delivers the goods. (For more insight, read Don't Panic If your Mutual Fund Is Drifting.)

Lastly, it is worth noting that not all investment qualities are created equal. Of the eight indicators used in the Fund Investment Quality Scorecard, some carry more weight than others. The analogy of a baseball team's batting can be used to illustrate this point. Those batters hitting in positions one to six ("top end") are expected to provide most of a team's runs. Not much offense is expected from those batting in positions seven to nine ("bottom end") in the order.

Similarly, among the factors on the Fund Investment Quality Scorecard, investment style consistency falls more into the bottom rather than the top of the batting order. Of course, style drift should be investigated, but as long as the investment managers produce results, it's OK to be flexible on this mutual fund factor. (See sample Morningstar and Value Line reports.)

Return to the Main Menu.
Proceed to the next chapter on Measuring A Fund's Risk and Return.


  1. Mutual Fund Categories
  2. Mutual Fund Style Box
  3. Fund I-Q Number 1: Investing Style
  4. Scoring Investment Style Data
Scoring Investment Style Data
RELATED TERMS
  1. Historic Pricing

    A method for calculating the value of an asset using the last ...
  2. Bear Fund

    A mutual fund designed to provide higher returns when the market ...
  3. Ulcer Index - UI

    An indicator developed by Peter G. Martin and Byron B. McCann ...
  4. Investment Company Act Of 1940

    Created in 1940 through an act of Congress, this piece of legislation ...
  5. Product Portfolio

    Investopedia explains: A Product Portfolio is the collection ...
  6. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
  1. What are the benefits and costs (or risks) of a systematic investment plan (SIP)?

    Discover the advantages and disadvantages of using a systematic investment plan; you may lower your average cost, or you ...
  2. What are the main differences between a systematic investment plan (SIP) and mutual ...

    Reduce your average cost per share on mutual fund investments using the dollar-cost averaging strategy by way of a systematic ...
  3. What are some examples of the most common types of investments on an IRA?

    Explore different investments commonly held in investment retirement accounts, such as certificates of deposit and exchange ...
  4. How can I convert a 401(k) into a Roth 401(k)?

    Investigate how to convert a 401(k) into a Roth 401(k) and compare the two different types of defined contribution pensions ...
Related Tutorials
  1. Top ETFs And What They Track: A Tutorial
    Mutual Funds & ETFs

    Top ETFs And What They Track: A Tutorial

  2. Analyzing The Best Retirement Plans And Investment Options
    Retirement

    Analyzing The Best Retirement Plans And Investment Options

  3. Complete Guide To Investment Companies, Funds And REITs
    Mutual Funds & ETFs

    Complete Guide To Investment Companies, Funds And REITs

  4. Fund Transactional Activity
    Mutual Funds & ETFs

    Fund Transactional Activity

  5. Hedge Funds Tutorial
    Mutual Funds & ETFs

    Hedge Funds Tutorial

Trading Center