With increasing popularity of mutual funds, a new problem has popped up for investors. Selection and performance evaluation of mutual funds is becoming as important as that of stocks. Each mutual fund generally adopts an investment style or philosophy. Since predicting future performance using historical data is not a wise approach, investors should select a mutual fund based on the style of investing. It is the style mandate that decides the characteristics of stocks selected from the broad universe.
It is widely known that factors such as size (small cap over large cap), value (value over growth) and momentum (winners over losers) deliver significant alpha over the full market cycle.
