Course 404: Style-Box-Specific versus Flexible Funds
Flexibility's Power, Purity's Charms
In this course
1 Introduction
2 Flexibility's Power, Purity's Charms
3 Using Flexible Funds

Lynch wasn't the only fund-industry luminary who would have the freedom to pursue his best ideas, wherever they may lie. David Decker of Janus Contrarian JSVAX, scours a much broader opportunity set than most of his large-blend peers and is willing to pick up stocks whose value has not yet been realized by the majority of the market. Over the last several years, the fund has traveled from the large-blend to the large-growth to the mid-value squares of the style box.

But flexible funds have their downside: They can make building a portfolio tricky. After all, if a fund is a small-cap fund one day and has large-company tendencies the next, how can investors be sure they're really diversified? No wonder some advisors and investors are wary of flexible funds.

Style-specific funds, meanwhile, tend to cleave to one part of our style box. They always invest in, say, small-value stocks or mid-cap growth stocks. Using index funds, such as Vanguard Value VIVAX, is one of the more certain ways to ensure style purity in a fund. As you can imagine, it's much easier to build and monitor a portfolio of style-pure funds. If you select four style-pure funds that invest in different ways, you can be confident that they'll continue to invest that way. Thus, you're always sure that you're diversified.

Next: Using Flexible Funds >>

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