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

Legendary fund manager and former head of Fidelity Magellan Peter Lynch was an opportunist. Sometimes he liked growth stocks. Other times, value investments held more allure. Large companies struck his fancy but so did smaller firms. Funds that are managed in this fashion often don't stick to one part of the Morningstar style box (see lesson 207), but migrate from box to box.

Some investors prefer this sort of flexibility, with a manager who is free to mine opportunities (and avoid trouble spots) wherever they may crop up. Other investors, meanwhile, prefer for their funds to stick to one style, so they can more easily build and maintain diversified portfolios according to their needs.

Morningstar may seem to be among the "style purists." After all, we categorize funds by narrow investment styles, such as large growth or small value. But we don't necessarily favor funds that stay in the same part of our style box year in and year out. In fact, while we know that style-specific funds have their charms, we acknowledge that flexible funds also have advantages. Neither one is better than the other. It's up to you to decide how to use each in your portfolio.

Next: Flexibility's Power, Purity's Charms >>

Print Lesson |Feedback | Digg! digg it
Learn how to invest like a pro with Morningstar’s Investment Workbooks (John Wiley & Sons, 2004, 2005), available at online bookstores.
Copyright 2015 Morningstar, Inc. All rights reserved. Please read our Privacy Policy.
If you have questions or comments please contact Morningstar.