What Investment Styles Suit You?

At your mid-year investment review with your trusted professional, consider the investment styles that best suit your personality and goals. Assessing your preferences for each style below can help you determine which styles best suit your personality and comfort level.

Active or Passive Management

Active managers generally measure their success by determining how much their portfolios exceed (or fail to match) the performance of a comparable unmanaged index, industry, or market sector. They also assess portfolio risk and how successfully they achieve other portfolio goals. This distinction is important for retired investors who need to manage risk over shorter time horizons. Active management may appeal more to investors who prefer to hold individual securities. Passive investors rarely trade individual securities, preferring to hold investments over a long period or to purchase mutual or exchange-traded fund investments.* Passive investors tend to rely on fund managers to ensure the fund investments are performing and expect managers to replace declining holdings as needed.

Passively managed funds generally have lower fees and are more tax-efficient than actively managed funds. With active investing, you pay for the sustained efforts of professional investment professionals who specialize in active investing and for the potential for higher returns than the markets. Investors considering active management should look at after-fee returns.

Growth or Value

Growth investors seek companies with high earnings growth rates, high return on equity, high profit margins, and low dividend yields. The basic tenet is that a firm with these characteristics is often an innovator. Growth companies generally reinvest most or all of their earnings to potentially sustain continued growth in the future.

Value-style investors focus on buying strong companies at reasonable prices. They look for low price-to-earnings ratios, low price-to-sales ratios, and generally higher dividend yields. This style is focused on the price at which investors buy.

Small Cap or Large Cap

Small-cap investors believe smaller companies should deliver better returns because they have greater growth opportunities and are more agile. But this potential comes with greater risk. Smaller companies have fewer resources and often have less diversified business lines. Share prices can fluctuate more widely, generating significant gains or losses. Small-cap investors must be comfortable taking on this additional risk for potentially greater returns.

If you are more risk-averse, you may be more comfortable investing in large-cap stocks. These companies are more established in their industries and have been around for a while. They may be unable to grow as quickly as smaller firms. But they also are unlikely to go out of business without warning. In return for the potentially lower risk, expect slightly lower returns with large caps.

Your investment style is unique, and may not be exactly one or another. Your trusted adviser can help you mesh your personal styles and investment choices.

*Investors should read the prospectus and consider the investment objectives, risks, charges, and expenses of the fund before investing. Because mutual and ETF fund values fluctuate, redeemed shares may be worth more or less than their investment. Past performance won't guarantee future results.