How to investin style mv fund?

Many investors believe that equity funds investing in the same territory and in the same market should have roughly the same performance, and therefore consider the choice of a particular fund to be of secondary importance. However, the opposite is true. The individual funds differ significantly from each other in their investment style, which determines the breeding fund for different market situations. Where do you invest in?

It may happen that while one equity fund investing only in an equity event in the S&P index of 500 m has a positive performance, the other fund investing in the same market is in dispute. Research shows that by choosing the fund alone, you determine the return and risk of your investment up to 80%.

Therefore, every investor should know the investment style of their fund and know how this style affects them vkonnost fund in various fzch market. Each equity fund should have this style clearly defined, explicitly understandable in a way that is clear to its existing and potential assets, and implicitly complied with. portfolio management fund. Unfortunately, no fund is able (or willing) to come out with its style open. Many investors are then diverse in that the fund did not anticipate breeding otherwise. So let’s look at the individual styles that characterize individual funds.

Active versus passive initially portfolio

The basic division of the fund management style represents the division into funds actively and passively managed (or index funds). While the purpose of an actively managed fund is to outperform the market, a passively managed fund waives this goal and, on the contrary, undertakes to achieve performance consistent with market entry. Passively managed funds have the advantage of having a transparent investment policy and not management fees. Their disadvantage is that they cannot actively adapt the portfolio to the current market situation and look for growth in the environment. But if the market effective, this objection is irrelevant to the index fund.

Star versus nov ekonomika

Simultaneously with the choice of actively or passively managed fund, the investor must

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decide whether to invest in a company representing the old economy (manufacturing companies, transport, energy, construction) or in companies under the new economy (technology, media, telecommunications). Funds investing in the old economy can be expected to have less risk and performance, funds investing in the new economy are risky and potentially efficient.

Small versus large businesses

If an investor opts for an actively managed fund, did he decide to choose a fund investing in Large Caps, Mid Caps or Small Caps? In the USA, companies with thorn capitalist you not 5 billion USD, usually it is the so-called blue chips. For small businesses are considered companies with a capitalization of less than 1 billion USD. It is obvious that large companies represent a stable source of income than small companies, and therefore they have fewer risks and offer less potential. Enterprises of the new economy fall and, with exceptions (Microsoft, Yahoo, Cisco), into the category of small enterprises.

Hodnota versus rst

Does it definitely continue to invest in companies that are in charge of it, or try to find companies from which they can soon emerge? The first approach is called Value, the second is Growth. In general, it is not possible for one approach to be risky than another. Growth approach is mainly in-depth knowledge of the fundamental situation of the company, the ability of its management and the potential of the market in which the company operates. Value approach is usually suitable in times of boom, or companies with a good position in the market in the growth of the economy have shown growth. On the contrary, the Growth approach is suitable in times of recession, when growth can be recorded only by companies with good management and a good strategy. Who will keep or increase his sales by growing his thorns.

Top-Down versus Bottom-Up

And does the fund prefer growth or value, how will the fund proceed in choosing the right company? The two basic selection strategies are: top-down selection (Top-Down) and bottom-up (Bottom-Up). With the Top-Down strategy, the fund’s portfolio manager first selects a promising region, economy and industry, and only then in this industry will he find a specific company in which to invest. Pi

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The strategy of the Bottom-Up fund manager is chosen by a specific company regardless of the perspective of the entire industry, economy or region.

It is obvious that the investment styles listed are certain extremes that cannot be characterized by any fund. At first, the portfolio is always a compromise between these extremes. This is especially true for the last two named types of strategies Growth versus Value and Top-Down versus Bottom-Up. The distinction between Growth and Value companies is not unequivocal. In the same way, when evaluating the company’s perspectives, it is impossible to avoid evaluating the perspectives of the industry and the region, and therefore most members of the Bottom-Up strategy select only those companies in their portfolios. That is why most foreign funds profile their style on a scale, with extremes on their edges.

What to watch out for

Despite the impossibility of strictly comparing individual styles, it is good to devote space to this issue, so that in the end we are not surprised to what extent this fund saves our resources and for it its performance is the same, or even better than the performance of other funds of the same group. It is very important to be careful when looking at the appropriate fund, we can say that the fund under its first will go to the one, it will be done in a different style. In such a situation, it is good to re-evaluate your investment.

Do you place an emphasis on investing in the fund’s investment style? Do you think the inevstin style of the fund will affect me in profit? Drink your experience.