In essence, ‘investment styles’ refer to how fund managers choose the underlying investments of their funds. Investments in a fund may be either actively or passively managed.
Actively managed funds require the use of human capital, or ‘people power’. A professional money manager or team/s, makes the investment decisions for the fund, relying on analytical research, personal judgment, and forecasts. Actively managed funds aim to outperform the market, and as such, they are also higher risk.
The two traditional ways of choosing stocks that active fund managers use are growth and value. There is also GARP or “Growth at a Reasonable Price” and Style-Neutral.
Passively managed funds seek to replicate the performance of their benchmarks, rather than outperform them. Two common strategies of passive fund management are index and buy and hold.
When we refer to asset allocation, we’re also considering diversification across the investment management styles as well.
Smart investing is not as easy as it sounds. While we can’t be responsible for the investment market returns, we’re here to help you understand how the investment strategies we recommend will help you meet your goals and suit your appetite for risk.
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