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Find the right mutual fund for you

Equity mutual fund managers use a number of different approaches in selecting the stocks that make up a fund. Understanding these styles can help you choose the types of funds you're most comfortable with.

In addition, by choosing funds with different styles, you can diversify your equity* portfolio by more than just asset class and geography. The following are some of the most commonly encountered mutual fund* management approaches:

Top down

Top-down managers start by analyzing the big economic picture, looking for industries and sectors that are likely to do well at a particular stage of the business cycle. Once the analysis is complete, they select leading stocks in the most promising sectors and weight those sectors more heavily in their portfolios. Top-down managers of international funds look for countries and regions with the best prospects.

Bottom up

Bottom-up managers focus on the quality of individual companies when they are selecting stocks. They look at fundamentals such as the price/earnings ratio, debt/equity ratio, earnings per share, and the overall soundness of the company's balance sheet. They may also talk to company executives and visit the company's facilities to help evaluate specific stocks.

Value

Value managers search for bargains — stocks that trade for less than their intrinsic value. They look for companies with underemployed or undervalued assets or for companies with low prices relative to earnings, book values, or dividends. The strategy is to buy undervalued stocks before the market recognizes their true value and drives prices up.

Growth

Growth managers look for companies whose sales, earnings, and stock prices have the potential to shoot up. Growth funds are usually more volatile than value funds, offering the potential for larger gains or losses.

Sector rotation

Sector rotators are market timers. These managers stack their portfolios with stocks from sectors that they believe are about to outperform, then rotate out of those sectors when they peak.

Momentum

Momentum managers look for upward trends in a stock or its sector. They buy stocks once they see clear upward movement, ride the trend to the top, and then sell when the inevitable downtrend starts.

There is no one investment style that's best for all investors or market conditions. Professional guidance with a BlueShore Financial financial advisor can help you choose the types of funds that best suit your goals, preferences, and comfort level.

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Mutual funds and related financial planning services are offered through Credential Asset Management Inc.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual fund securities and cash balances are not insured nor guaranteed, their values change frequently and past performance may not be repeated.

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