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We use the word "style" when describing how people dress, wear their hair, and even walk and talk. But style also plays a role in how we invest our money. Just as your wardrobe and hairstyle have to suit you and the way you live, so it is with investments. Identifying and adopting an investment style that's a good fit is the first step toward securing your financial future.

Here are common questions about investment styles:

What exactly do you mean by "investment style"?
The term refers to an investor's basic approach to choosing investments, whether those be stocks, bonds, real estate, and so on. If you're investing on your own, your investment style will dictate how you make your choices. Similarly, if you invest in a mutual fund that makes the selections for you, you need to be sure the fund's investment style matches your own.

How many different investment styles are there?
A few dozen, by some analysts' count. For instance, Morningstar, one of the major information sources on mutual funds, cites 33 different investment style categories. A few you're likely to hear about most are: growth, value, income, and blended.

How do these styles differ from each other?
Here are some basic distinctions:
      Growth: Investors using a growth style put their money into securities, typically stocks, that are growing in earnings. These stocks are growing, or are expected to grow, faster than the stock market average. The growth investor aims for big gains over the long term, but also faces risks as growth-oriented companies go through their ups and downs. In fact, short-term losses can be substantial and severe during down cycles.
      Value: In the value style, investors look for stocks that are comparatively low-priced, but the price doesn't accurately reflect the company's potential and current assets. Thus, value investors are betting that the company's stock will rise again to reflect its true value.
      Income: Investors using an income style choose securities that produce regular but modest earnings. Some examples include government-issued bonds or money market mutual funds. Income investments don't bring as much potential for gain as growth investments, but they also carry less risk for loss. Thus, income investors aim for fairly stable earnings over time.
      Blended: The blended style combines both growth and income investments, to strike a balance between the potential for gain and the risk of loss.

Which style is right for me?
Finding the answer to that question is, of course, the key to devising an investment strategy that takes you where you want to go. Before you adopt an investment style, examine several factors.
      For instance, what is your risk tolerance? That will depend partially on your personality. Stark realism is in order here. Would you be able to take losses in stride during the short term? Or would any losses now leave you financially strapped and unable to pay your current debts and living expenses? Would you be able to hang on for the long haul, even through the market's inevitable ups and downs?
      Other factors to consider are your age, financial goals, and investment time frame. When will you need to use the money you're investing? If you still have a few decades before retirement, or if you'll be drawing on your retirement funds gradually once you're in your decades-long retirement--as most do--you'll have ample opportunity to regain whatever short-term losses you might incur. Thus, a growth investment style may serve you well.
      But if you'll need the bulk of your retirement money all at once, or you'll be sending a daughter off to college in five years, you can't afford to let your nest egg take a severe hit. You'd be better off with the shorter term, less risky income investment style.
      Yet another factor to weigh is your tax situation. Years from now, will you be in a higher or lower tax bracket than you're in today? Depending on your projections, you may want to consider investments that generate tax-free or tax-deferred earnings.<!--this is a good place to link to your credit union's investment products such as IRAs--!>
      Your risk tolerance,
      age, financial goals,
      investment time frame,
      and tax situation
      all enter into
      determining your
      investment style.


An investment style
gives you a
framework to follow
in choosing investments.
Why do I need to select an investment style?
Choosing an investment style allows you to take a planned approach to investing. It gives you a framework to follow. Without that, you'll be making random investment selections based on an advertisement you read or a "hot tip" you hear from a colleague.
      But those choices may not help you reach your financial goals. Rather, by selecting a style that's in sync with your financial situation and then choosing investments according to that style, you boost your chances of getting what you want out of your investment program.

What if no one style seems to suit me?
The investment styles mentioned are guidelines, not rigid categories. In real life, you often have several financial goals at the same time. So your investment style may incorporate elements of two or more styles. For instance, you might put some money into growth investments, some into income, and some into blended. One of those may predominate or you might split your investments evenly among different types. The mix depends on the factors discussed above.

Your investment style
must have a longer
shelf life than do
styles in the
fashion world.
When should I change my investment style?
During your lifetime, you'll need to adapt your investment style now and then to match your changing needs and finances. Bear in mind, though, that your investment style must have a longer shelf life than do styles in the fashion world. An investment style is not something to abandon because it's last year's model, or because you're impatient for better results. Being successful in investing depends on choosing an approach and giving it time to work for you. Alter your style only when your life circumstances or goals change significantly, calling for a similar shift in your investment approach.

Do words such as "growth" and "balanced" in the names of mutual funds tell all I need to know about a fund's investment style?
Not necessarily. Two funds described as "balanced" funds may have markedly different investment mixes. You need to look deeper than the name to be sure the fund's investment style matches your own.

So how do I find out about a mutual fund's investment style?
Study the fund's literature, including the prospectus, to find out the fund's objectives and investment policies. Annual reports are another source of information about the fund's approach. You can call the fund's toll-free number to talk to a service representative about the fund's style and to request a list of securities in the fund's portfolio. Your public library has resources, such as those published by Morningstar and Lipper Analytical Services, that analyze mutual funds.
      You also can do your research on the Web, but be sure the site is up-to-date and published by a reputable source. The American Association of Individual Investors' site is just one that provides reliable investment information.

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