by Juan Leer

Created on: March 25, 2007   Last Updated: July 23, 2009

Mutual funds are a popular investment tool, as it allows you to easily diversify your investment portfolio to create optimal returns with a more minimal amount of risk. Simply put, the style of the mutual fund is basically a look at how aggressive the fund will be styled, and what type of stocks and bonds that the fund will buy.

So basically a fund style basically looks at the style that the fund manager is employing, and is obviously extremely important for the investor because you want to buy a fund that fits your investment style and risk tolerance. If you want to buy a mutual fund for retirement, then you will choose a fund that invests in more stable funds that are likely to go up over the long-term. If you are looking for short-term growth, then you will look at investing in a fund that might buy more risky and volatile stocks.

Looking at the Morningstar Fund Style Box, there are 9 different styles of Mutual Funds: Small Value, Small Blend, Small Growth, Medium Value, Medium Blend, Medium Growth, Large Value, Large Blend, Large Growth.

What do those terms mean? Well, the Large, Medium, and Small all refers to the size of the company. Large-cap funds invest in companies with a large market value, Medium-cap funds invest in companies with medium market value, and Small-cap funds invest in companies with a small market value. This is a quick way to search through that if you have a particular preference for that type of company.

For the other terminology, Growth Funds invest in companies that are believed to be the fasting growing, Value Funds look to invest in companies that might be undervalued, and Blend Funds have a mixture of both. Once again, this allows you to quickly sort out and search for a fund that fits what you are looking for, and makes picking a mutual fund and quick and easy as possible.

So the terminology can look hard, but once you figure things out, it's not too hard to find out what style a Mutual Fund is, and that can tell you a lot about the Fund. As an investor, this is very important because you have to know what type of Fund you are investing in if you want to meet your investment objectives. Mutual funds are an easy way to start investing in the stock market, which is why they are important to understand.

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