Understanding Investment Styles

Just as taste in clothes or food may differ from person to person, so, too, does one's investing style. Some embrace risk while others avoid it. Some prefer a "do-it-for-me" approach while others opt for a self-directed strategy. For businesses looking to help meet the diverse needs of their employees, it is helpful to first understand what the different kinds of investment styles are and how they apply to different people.

The following summarizes general investing styles that you are likely to encounter in many offerings and how they map to different employee styles.

Common Mutual Fund Investment Styles1



May be appropriate for employees who


Attempts to outperform the market by actively picking out the stocks.

Strive for the potential to outperform major benchmarks


Believes that investing in a market index2 will produce better long-term results.

Seek the potential to mirror the overall market and wish to minimize fees


Seeks out growth stocks with strong earnings growth.

Plan to seek the potential of higher returns, have longer time horizons, and are willing to take on higher risk.


Picks asset-oriented "cheap" stocks with lower valuations.

Plan to seek the potential of higher returns, have longer time horizons, and are willing to take on higher risk.

Small Cap

Prefers small-cap stocks for their higher potential for growth.

Plan to seek the potential of higher returns, have longer time horizons, and are willing to take on higher risk.

Large Cap

Believes that large-cap stocks provide less volatility and can still outperform small-cap funds.

Plan to seek the potential of higher returns, have longer time horizons, and are willing to take on higher risk – possibly with less volatility than small cap.

Target Date3

Automatically rebalances asset allocation over the years specified in the fund's name.

Prefer a “do it for me” approach.


Balances holdings between stocks and bonds.

Have a shorter time horizon, but still willing to take on some level of risk.

Stable Value

Invests in bonds and other less volatile investments.

Seek to be risk averse, approaching retirement or seek to minimize volatility.

Active vs. Passive

Active investors may try picking stocks they think will perform well. Passive investors, on the other hand, may feel that simply investing in a market index fund can produce higher long-term results. Rather than trying to second guess the market, passive investors may buy the entire market via index funds.

Growth vs. Value

Proponents of growth may seek companies they expect to grow earnings rapidly. Stocks in these companies tend to have high price-to-earnings (P/E) ratios since investors pay a premium for the potential of higher returns. They also usually pay little or no dividends. The result is that growth stocks tend to be more volatile, and therefore more risky.

Value investors may look for bargains -- stocks perceived to be undervalued that are often out of favor, such as cyclical stocks that are at the low end of their business cycle. Value stocks tend to have lower P/E ratios and higher dividend yields. These higher yields tend to cushion value stocks in down markets while certain cyclical stocks will lead the market following a recession.


Some investors use the size of a company as the basis for investing. At times, the highest returns, on average, have come from stocks of smaller companies. But since returns tend to run in cycles, there have also been periods when large-cap stocks have outperformed smaller-cap stocks. Small-cap stocks also tend to have higher price volatility, which translates into higher risk. Some investors choose the middle ground and invest in mid-cap stocks -- seeking a trade-off between volatility and return.

Target Date

With target-date funds3, your portfolio's asset allocation is automatically rebalanced on your behalf over the years by the fund's managers, typically growing more conservative as the identified target date approaches. Generally speaking, the name of each target-date fund includes a specific year, such as "2020" or "2030." All you need to do is choose a fund named for the year closest to the year of your goal. From that point on, professional money managers make all the investment decisions within the fund.

Balanced and Stable Value

While these are not technically "styles," they are common types of mutual funds found in plan offerings. Balanced funds split holdings equally between stocks and bonds, while stable value funds invest in bonds and other less volatile investments. Stable value is typically a core holding for risk-averse investors.

Although not all plans offer all these styles, it helps to know them and what how they might fit your employee profiles.

1Investing involves risk, including loss of principal. The principal value of a target-date fund cannot be guaranteed at any time, including the target date, and may decline at any time.

2It is not possible to invest directly in a market index.

3Target-date funds typically invest in other investments and are designed for investors who are planning to retire during the target date year. The fund's target date is the approximate date of when investors expect to begin withdrawing their money. A Target date fund's investment objective/strategy typically becomes more conservative over time primarily by reducing its allocation to equity investments and increasing its allocations in fixed-income investments. An investor's principal value in a target-date fund is not guaranteed at any time, including at the fund's target date.

Important Note

AXA believes that education is a key step toward addressing your financial goals, and we’ve designed this material to serve simply as an informational and educational resource. Accordingly, this discussion does not offer or constitute investment advice and makes no direct or indirect recommendation of any particular product or of the appropriateness of any particular investment related option. Your needs, goals and circumstances are unique, and they require the individualized attention of your financial professional. But for now, take some time just to learn more.

Please consider the charges, risk, expenses, and investment objectives carefully before purchasing a variable annuity. For a prospectus containing this and other information, please contact a financial professional. Read it carefully before you invest or send money.

Growth Portfolios: Investing in growth stocks is based upon a portfolio manager's subjective assessment of fundamentals or the companies he or she believes offer the potential for price appreciation. This style of investing involves risks and investors can lose money.

Small Cap Portfolios: The investor should note that portfolios that invest in stocks of small companies involve additional risks. Smaller companies typically have a higher risk of failure, and are not as well established as larger blue-chip companies. Historically, smaller-company portfolios have experienced a greater degree of market volatility than the overall market average

Large Cap Portfolios: Investments in large-cap companies may involve the risk that larger more established companies may be unable to respond quickly to new competitive challenges such as changes in technology and consumer tastes.

This article has been written and is provided for general information purposes only. This material does not constitute an offer or solicitation of any kind and is not intended, and should not be relied upon, as investment, tax, legal, or financial advice or services. 

Securities offered through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC. Annuity and insurance products, including those issued by AXA Equitable Life Insurance Company (NY NY), offered through AXA Network, LLC, which conducts business in CA as AXA Network Insurance Agency of California, LLC, in UT as AXA Network Insurance Agency of Utah, LLC and in PR as AXA Network of Puerto Rico, Inc.

The retirement plan would be funded by an annuity contract issued and distributed by AXA Equitable Life Insurance Company (AXA Equitable), New York, NY. Annuities contain certain limitations and restrictions.

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This information is provided for informational purposes only. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues. 

Please be advised that this document is not intended as legal or tax advice.  Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.  The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor.

AXA Equitable Life Insurance Company (New York, NY) issues life insurance and annuity products. Securities offered through AXA Advisors, LLC, member FINRA, SIPC.  AXA Equitable Life Insurance Company and AXA Advisors are affiliated and do not provide tax or legal advice.

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