Investment Fundamentals: The Mutual Fund Style Box
by Mitchell J. Smilowitz, CPA
An easy-to-understand visual representation of stock funds is the Morningstar Style Box™. The Style Box categorizes equity mutual funds based on market capitalization (i.e., company size in dollars) and investment style (i.e. growth or value). Morningstar, Inc., a mutual fund research company that provides data and research services to investors, developed the Style Box to make it easier to understand a mutual fund’s investment objectives and strategy. The Style Box allows informed comparisons of what stock funds actually hold. The JRB uses the Style Box to categorize the funds we offer. You can use it to evaluate your portfolio’s diversification and balance between risk and return.
There are two major types of investment styles. Growth companies are those whose stock price mutual fund managers believe are poised to increase. Value companies are those whose stock price mutual fund managers believe are undervalued. A mutual fund with a blended investment style holds stocks in both growth and value companies.
This article focuses on the domestic equity Style Box (see below). In general, the colors reflect the relative risk and volatility of the funds in each category. Risk and volatility tend to increase as you move from left to right and from top to bottom. For example, Large-cap/Value funds tend to be less risky and volatile. Small-cap/Growth funds tend to carry greater risk and volatility.
The vertical axis reflects market capitalization. A large-cap company generally has a market value over $10 billion. Mid-cap companies generally have a market value between $2 billion and $10 billion. Companies with a market value below $2 billion are generally considered small-cap. The horizontal axis categorizes the fund by investment style — whether it follows a value, growth or blended strategy.
Experts suggest that diversification in asset class and investment style is a prudent approach to building your retirement portfolio. This does not necessarily mean that your investments should include equal allocations to each style box. Have questions about your asset allocation? Contact the JRB or call 888-JRB-FREE (572-3733).
Putting JRB Domestic Stock Funds in the Style Box
The following chart assigns each domestic equity fund the JRB offers to the Style Box. The JRB funds are categorized as they are described in each fund’s prospectus. A fund’s actual investment style can “drift” from a category. Drift can occur because a company the fund owns moves from one category to another (for example, a small-cap company may grow to become a mid-cap company).
Value | Blend | Growth | |
Large | JPMorgan Equity-Income R6 |
| |
Mid | |||
Small | Loomis Sayles Small-Cap Value N |
For more information on the Morningstar Style Box™, click here.
January 2025