Mutual Funds: Fund Objective and Style

A fund tells you what it wants to achieve and how it plans to do it.

Each mutual fund has an investment objective — a goal or financial result it wants to realize. And each fund manager has an investment style, which is the approach he or she follows in making investments to achieve the fund's goal.

Most fund objectives fit into one of several broad categories, such as growth in value, current income, or a combination of growth and income. For example, a growth fund selects investments that seem likely to increase in value over time. An income fund, on the other hand, targets investments that it expects to generate revenue, such as stock dividends.

Styles are harder to classify than objectives, since many factors contribute to the way a manager makes investment decisions. But there are several well-recognized approaches, including styles that stress growth, those that stress value, and those that stress capital preservation


The Fund's Objective



When a stock mutual fund defines its investment objective, it is identifying a specific type of stock — though not individual stocks — that will be the core of its portfolio.

Sometimes the objective is quite broad. For example, the manager of a fund whose objective is long-term growth may look for a range of companies whose current market capitalization is small — less than $2.3 billion — because he or she believes they have the potential to increase significantly in value over several years.

Other times, the objective may be quite focused and reflect social, political, or religious interests. For example, some socially conscious funds buy stock in companies whose products and services are acceptable to investors who want to avoid tobacco, firearms, gambling, or a range of other activities. Others, called green funds, buy only the stocks of environmentally friendly companies.