What's Your Investing Style?
That’s not unusual. When market leadership changes, it’s rarely a clean and easy break, says Francis Gannon, co-chief investment officer at investment firm Royce Investment Partners, which specializes in small-capitalization stocks.
“No one is ringing the bell saying, ‘This is the time to rotate.'” In fact, it usually looks more like a game of tug of war, he says, another good reason to keep a variety of styles in your portfolio.
Fashion can be fun, but don’t let a focus on investing style take your eye off the most important parts of your investment plan, says Schwab’s Stein. A proper asset allocation among stocks, bonds, cash and alternatives comes first.
Align your investing goals with how long you have to invest and your tolerance for risk. And reassess everything once a year because goals “are absolutely going to change over time,” adds Stein. Rebalancing regularly will keep your asset allocation in line with your targets.
Then, go ahead and try on some different investing approaches. In this story, we’ll explain seven major investing styles and tell you what you can expect from them, including when they tend to perform best — or not. We’ll also provide ideas about ways to incorporate certain styles into your portfolio.
All returns and data are through August 31.
1. In search of growth
The approach: The quarry here, no surprise, is fast-growing companies. Rising earnings drive stock prices higher, the thinking goes. Growth stocks typically don’t pay dividends; they’re plowing cash back into the business. Shares can be pricey, too. The Russell 1000 Growth Index recently traded at a price-to-earnings (P/E) multiple of 31; by contrast, the broader Russell 1000 bogey sported a P/E of 25.
And people define growth in a lot of different ways, says Ashley Reed Woodruff, a growth-stock fund manager at T. Rowe Price. Some focus on rising earnings; others, on accelerating revenue or cash flow, or a combination. And it’s relative, of course — a company has to be growing faster than its competitors, say, or the broad market.
There’s a variety of approaches under the growth umbrella. Emerging-growth strategies focus on fledgling companies; high-growth stocks often couple high expectations for future growth with high prices; growth at a reasonable price, known as GARP, looks for faster-than-average growth at less-than-lofty valuations.
What to expect: Growth stocks perform best in a recovering or expanding economy. That part of the business cycle lasts roughly four years, on average, according to investment firm Fidelity.
But in recent years, near-zero interest rates and a slew of disruptive technologies (smart devices, cloud computing and artificial intelligence) have fueled a nearly two-decade-long rally in growth stocks. Over the past 15 years, large-company growth-stock indexes have returned 17% annualized, two percentage points per year ahead of the broad market.
A slow-growing economy and recessionary times, often accompanied by rising interest rates, are challenging for growth stocks. In 2022, for instance, when the Federal Reserve raised short-term interest rates seven times, the S&P 500 Growth Index lost 29%, far more than the 18% decline in the broad S&P 500 Index that year.
These stocks can be touchy, so expect volatility. Any sign of a growth slowdown — an earnings miss, for example, or a trim in company forecasts for future growth — can send a stock tumbling.
Shares in AppLovin (APP), a digital advertising company, plunged 20% in August, the day after the firm missed analysts’ expectations for revenues in the recent quarter and issued a cautious outlook.
If you’re investing in individual growth stocks, keep an eye out for red flags that may be cause to reevaluate the investment. An abrupt change in management (for example, the chief financial officer exits) is one, or the business makes an acquisition that doesn’t fit with its brand.
“Focus is so important to create a good business, and when companies get distracted that’s always a warning sign,” says Reed Woodruff. A sky-high P/E can be worrisome, too. For context, stocks in the S&P 500 carry an average P/E of 20. “A 40 P/E is hard to sustain,” she says.
Though one bad quarter isn’t an automatic signal to sell (it could perhaps be a good time to buy), two in a row might mean it’s time for a review. Deciding how and when you’ll proceed to the off-ramp before you invest in a stock can “help you stay disciplined, and it’s one way to handle the volatility,” says Reed Woodruff.
Best for: Investors who can stomach a rocky ride and who have the time horizon to wait out the ups and downs.
Ways to work this style into your portfolio: Consider the Invesco Large Cap Growth ETF (PWB), which holds roughly 50 stocks that meet high-growth parameters, or the iShares MSCI USA Quality GARP ETF (GARP), which holds growth stocks trading at reasonable prices.
Fidelity Blue Chip Growth (FBGRX), a member of the Kiplinger 25, the list of our favorite no-load mutual funds, has outpaced its peers in eight of the past 10 full calendar years.
2. Seeking value
The approach: Value investors buy straw hats in winter, the saying goes, when nobody wants one and the toppers are on sale. “At their core, value investors are focused on what they are paying versus what a stock is worth,” says David Hoeft, chief investment officer at Dodge & Cox. Key to that calculus, though, is recognizing that at some point, summer weather will make those hats hot again.
Value-priced stocks are often established businesses in so-called economically sensitive sectors, such as financials, energy and industrials, or defensive sectors, such as utilities and consumer staples (companies that make everyday necessities). Value stocks often pay dividends and tend to hold up better in down markets. The dividend yield of the S&P 500 Value Index, 1.7%, is triple the yield of the S&P 500 Growth Index.
But value investments aren’t limited to stodgy names. The value-oriented fund Dodge & Cox Stock (DODGX), for instance, owns stakes in several go-go tech firms, including Taiwan Semiconductor Manufacturing (TSM) and Alphabet (GOOGL). Some were inexpensive when the fund acquired shares; others traded at bargains relative to their growth prospects, says Hoeft.
The definition of value can vary. Value investors ply a multitude of ratios to determine whether a stock is cheap, such as price-to-earnings; price-to-book value (total assets minus liabilities); price-to-free cash flow (money left over after operating expenses and spending to maintain or upgrade long-term assets); and enterprise value (the value of a business if it were sold today) to EBIT (earnings before interest and taxes). And there are more.
The way those measures are applied varies by stock picker. The deep-value investors at fund firm Pzena Investment Management, for example, focus on the stocks that trade at the lowest-ranked price relative to earnings growth. At Oakmark Funds, the managers compare what they think a business is worth with the company’s market value to find undervalued stocks.
What to expect: Value stocks have lagged growth shares for so long that many have given the strategy up for dead. But history has favored the approach, at least over extremely long hauls. According to a June 2026 study by Dimensional Fund Advisors, value stocks have outperformed growth stocks by 4.0% annually since 1927.
And value has had its moments in recent years. The Russell 1000 Value Index held up better in a rough 2022, with an 8% loss (the broad market fell 18%). In 2016, the value bogey gained 17%, besting the Russell 1000 Index and its growth subset, the Russell 1000 Growth Index. And value shares have surged 30% over the past 12 months, ahead of the 20% return in the broad market.
Patience is necessary to be a steady value investor, because it can take time for investment theses to come to fruition. A 2018 bet on CVS Health (CVS) at Dodge & Cox Stock didn’t play out, says Hoeft, until the quarter that ended in June, when the stock gained 45% and was a top performer in the fund.
“We think that businesses are like living organisms. If they’re in distress, there needs to be a response, there needs to be a change made, and time needs to pass for those changes to be effective,” says Hoeft. “That’s a natural cycle for companies that run into the ditch before they can recover.”
If a recovery takes too long, however, you may have a value trap on your hands — arguably the biggest risk in this investing style. Look for warning signs: The company’s technology is becoming obsolete (think Eastman Kodak); its earnings power is eroding (Sears Holdings); debt is crippling its balance sheet (Enron); or executives are making questionable decisions (GE before the 2018 arrival of CEO and turnaround maestro Larry Culp).
But often, value traps are hard to identify. The best defense is to size your bets appropriately and dollar-cost average your way in by buying at regular intervals over time. Also, “be nimble and opportunistic,” says Hoeft. Take some profits if they materialize when the stock price bounces, for instance, as the managers at Dodge & Cox did with CVS.
Best for: Patient investors with a long-term view.
Ways to work this style into your portfolio: The Vanguard Russell 1000 Value ETF (VONV) is a plain-vanilla index fund. The Invesco Large Cap Value ETF (PWV) offers a more targeted portfolio. The index fund sifts for 10 value-oriented factors, and it has outpaced the Russell 1000 Value Index over the past three, five, 10 and 15 years.
Two actively managed exchange-traded funds, Avantis U.S. Large Cap Value (AVLV) and Fidelity Enhanced Large Cap Value (FELV), consistently beat the Russell 1000 Value bogey.
3. A passive stance
The approach: Indexing, or passive investing, needs little introduction. It’s the most popular investment style these days. It’s also the simplest — the strategy seeks to copy the performance of a specific benchmark.
What to expect: Index funds offer many upsides. In one go, they offer broad exposure to an asset class, making them ideal set-it-and-forget-it, long-term holdings. “The goal is not to outperform the market. It’s to be invested for the long term,” says Kathy Kellert, head of equity indexing products at Vanguard.
That said, an index fund moves up and down in line with its benchmark. “When markets decline, investors will experience those losses,” Kellert adds.
Over the long haul, of course, stock prices rise. A $10,000 investment in the Vanguard 500 Index Fund (VFIAX) when it launched in 1976 would be worth $2 million today, after “weathering many market cycles,” Kellert says.
Indexing does require a little work, however. Two index funds can have similar names but totally different strategies, so it’s important to understand exactly what kind of index fund you’re buying. Stick with funds that are rules-based, transparent and broad. And if you’re combining a large-company index fund with a small-cap index fund, stick with the same benchmark provider.
Pair the iShares Core S&P 500 ETF (IVV), for instance, with the iShares Core S&P Small-Cap ETF (IJR), as we do in the Kiplinger ETF 20, the list of our favorite exchange-traded funds. “If you combine an S&P 500 fund with a Russell 2000 fund, you would accidentally be missing the 500 securities that are not included in either of those benchmarks, and that could mean a significant impact to overall return,” says Kellert.
Best for: Investors who want a low-cost, care-free core portfolio or are looking for a simple way to tilt their portfolio toward a style, sector or region of the world.
Ways to work this style into your portfolio: Hold a total stock market fund, such as the Vanguard Morningstar Total Stock Market ETF (VTI) or the Vanguard Total International Stock ETF (VXUS).
Or add tilts to your portfolio. Looking to beef up your exposure to value? Consider the iShares S&P 500 Value ETF (IVE).
ETFs make it easy to home in on hot sectors. For example, you could target technology with the State Street Technology Select Sector SPDR ETF (XLK) or healthcare with the State Street Health Care Select Sector SPDR ETF (XLV). Add a smidgen of emerging-markets exposure with the iShares Core MSCI Emerging Markets ETF (IEMG), a member of the Kiplinger ETF 20.
4. Keeping active
The approach: Active investing is the opposite of a passive approach: Instead of matching an index’s return, professional stock pickers aim to beat it, usually through meticulous research.
But the popularity of indexing, combined with the long rally in large-cap stocks, has cast a harsh spotlight on active managers. Most lag their respective benchmarks over long and short periods. In 2025, 79% of large-cap funds lagged the S&P 500, among the worst years for active large-cap managers since S&P Global started keeping track.
Even so, studies show that low-cost actively managed funds can have an impact in certain asset classes and sectors, including midsize- and small-company stocks, large-company value, emerging markets and real estate.
Generally, any asset class that has fewer market watchers or is changing too quickly for the herd to keep up is a ripe target for active managers. The latter applies to the tech sector, says Adam Patti, chief executive of ETF firm VistaShares.
“Having an active process is very important in disruptive technologies,” he says. “The companies are constantly jockeying for position, and new technologies are usurping old technologies.”
Note that active and passive strategies can coexist in a portfolio. A combination of the strategies “can be an effective way to get the benefit of low-cost funds but also seek outperformance,” says Vanguard’s Kellert.
What to expect: Good active managers can beat the market over long hauls, but they’re going to underperform in some years. The standout Primecap fund managers, who together run seven mutual fund strategies, lagged the broad market in five calendar years out of the past 10 (2019 through 2021, and 2023 through 2024).
Even so, six of the seven funds have outpaced the S&P 500 on an annualized-return basis over the past decade, and all seven beat the bogey over the past 20 years.
Best for: Investors looking to boost returns and beat the market.
Ways to work this style into your portfolio: The tricky part is finding a good active manager. Stick with long-term managers who have proved themselves over at least one market cycle but preferably more.
Aim for funds with below-average fees; the average actively managed, large-company fund charges 0.91% in annual expenses. And don’t be afraid to embrace funds that look different from their benchmark or the broad market — you’re buying that manager’s expertise, after all.
5. Riding momentum
The approach: Momentum investors believe that winning stocks continue to win, and losers keep losing. So they buy winners and sell losers in hopes of ultimately beating the market. “The trend is your friend,” says CFRA Research chief investment strategist Sam Stovall.
Most momentum investors focus on price returns, but some use earnings — reported earnings or analysts’ adjustments to earnings forecasts — to measure momentum instead. One of the most common approaches uses a 12-month price return as a gauge, excluding the most recent month to prevent temporary blips from distorting the longer-term signal.
Many point to tech and AI-related stocks as momentum-stock poster children, and that trade has worked for years. But the tide has turned. Since it peaked in late June, the S&P 500 Momentum Index has fallen 9%.
What to expect: Volatility. Momentum funds have been about 15% more rocky than the S&P 500 over the past decade. That’s bumpier than an investment in a typical large-growth fund over the same period, but it’s not nearly as rough a ride as pure tech funds have delivered.
A momentum strategy fares best when market leadership stays steady or changes gradually. If sentiment shifts dramatically and quickly, momentum funds can get caught behind the times and miss the rally. Many momentum funds struggled in 2016, for instance. The year kicked off with growth stocks in the lead and closed with value-oriented sectors dominating.
If you’re planning to build your own momentum-stock portfolio, “active monitoring is required,” says Schwab’s Stein. “When momentum changes and the stocks you hold are no longer in favor, you need to react to the changes in what you own and hold.”
Best for: Investors who want to add a little spice to their portfolio and have nerves of steel.
Ways to work this style into your portfolio: Two ETFs have been less volatile than their momentum-fund peers in part because they hew to sector exposures that match broad-market benchmarks: The JPMorgan Momentum U.S. Factor ETF (JMOM) targets stocks with higher 12-month risk-adjusted returns relative to sector peers, and the Fidelity Momentum Factor ETF (FDMO) ranks stocks within sectors on four momentum measures, including total returns and positive earnings surprises.
A trio of momentum funds tied to S&P indexes, Invesco S&P 500 Momentum (SPMO) and its smaller-cap siblings, Invesco S&P MidCap Momentum (XMMO) and Invesco S&P SmallCap Momentum (XSMO), prioritize returns over the past 12 months and reconstitute and rebalance twice a year, in March and September (companies are weighted by market value and by how well they fare on a proprietary momentum score).
Each fund beat its respective traditional benchmark over the past three, five and 10 years. But the recent shift in market leadership has wrecked the one-year returns for SmallCap Momentum and MidCap Momentum relative to broad small-company and midsize-company indexes.
6. A contrarian mindset
The approach: Contrarians go against the herd and swim against the tide. They’re greedy when others are fearful and fearful when others are greedy. (Warren Buffett, who coined that last bon mot, is a famous contrarian.)
In today’s market, contrarians might be unloading tech and energy shares — the top-performing sectors over the first eight months of the year — and snapping up stocks in the worst-performing sectors: communications services and utilities.
The style shares some similarities with value investing. Both of them troll discounted stocks for opportunities, and the bargain-oriented stock pickers at Dodge & Cox are avowed contrarian investors. The firm’s Stock fund holds shares in HP (HPQ), the PC and printer maker, for example, when only a handful of analysts rate HP a Buy today.
“It’s in the crosshairs of contrarian investing, and it’s a value stock we own,” says Hoeft, of Dodge & Cox Stock.
What to expect: Be patient. A lot of contrarian stocks are distressed companies. Navigating a turnaround can take time. While you wait, stock prices can sink further. Be prepared to do tons of research, too. Contrarian investors need to be willing to dig into the details.
Ways to work this style into your portfolio: Contrarian isn’t a market factor you can measure, so it’s hard to pinpoint pure contrarian strategies. One that looks promising: Meridian Contrarian (MFCAX), an A-share-class fund that trades without a transaction fee at Schwab and E*Trade. The managers can invest in any size company, wherever they find opportunity in undervalued shares.
That’s why Morningstar has categorized the fund, at different times over the past decade, as mid-growth, mid-blend and, most recently, small-blend. In true contrarian fashion, its long-term 10-year annualized return ranks among the top 14% of small-cap blend funds. But it falls below average in performance relative to peers for shorter time periods.
Dodge & Cox Stock (DODGX) is a large-value fund but, as mentioned, its managers are self-described contrarians. Over the past 15 years, the fund’s annualized return has outpaced 92% of its large-value fund competition — but, alas, not the S&P 500.
7. Thinking small (companies, that is)
The approach: In the investing world, large-company stocks are the starting point, the big fish in the pond. After all, the large-cap benchmark, the S&P 500, is synonymous with “the market.” Moving away from the standard is a style choice. And the obvious yin to large caps’ yang is small-company stocks.
Focusing on small-cap shares — stocks with market values of $10 billion or less — is a long-standing investment approach. It stems from academic studies that found that over multi-decade periods, small-company stocks have delivered better returns than shares in larger firms.
Of course, small firms are more risky than large ones — generally speaking, small companies are more sensitive to economic cycles, have less diversified businesses and more debt. Ergo, the potential rewards are richer.
But over shorter periods, small-company stocks can wax and wane relative to large ones, depending on economic factors, industry innovations or even market sentiment. The cycle between company-size leadership tends to last about a decade, says Royce’s Gannon. For more than a decade, large-company stocks have held the pole position; before that, small led large for 15 years.
Recently, small-cap stocks have taken the lead. From the tariff-tantrum market low in early April 2025, the Russell 2000 small-company index gained a cumulative 71% through August; the Russell Microcap Index, an even-smaller-company benchmark, soared 102%.
By contrast, the Russell 1000 large-company index climbed just 57%. “We’re in the early innings of a prolonged small-cap cycle,” Gannon says, buoyed by robust expected earnings growth for 2026 and 2027 that outpaces projected growth for large-company stocks. Of course, in recent years, other small-cap rallies have failed to last. We’re watching the asset class closely.
What to expect: Coming out of a recession or a market bottom, small caps tend to outperform. But when the broad market dips, they will fall harder. In a recession, or heading into a recession, these stocks typically suffer more than large-cap shares. All those ups and downs can add volatility, so be prepared. Over the past 15 years, the Russell 2000 Index has been 44% more volatile than the Russell 1000 large-company benchmark.
Best for: Investors with long time horizons and a high tolerance for risk.
Ways to work this style into your portfolio: The iShares Core S&P Small-Cap ETF (IJR) tracks an index that includes only small-cap companies that are profitable, cutting risk somewhat. It has returned 24% over the past 12 months. The iShares Micro-Cap ETF (IWC) has gained 37% and tracks very small U.S. stocks. Active managers can make a difference in the small-cap space.
Oberweis Small-Cap Opportunities (OBSOX), a Kip 25 fund, outpaced the Russell 2000 over the past one-, three-, five- and 10-year periods. The Fidelity Enhanced Small Cap Core ETF (FESM) relies on a strategy driven by a computer algorithm, and it has beaten the index consistently.
For microcap stocks, consider Royce Micro-Cap (RYOTX). The fund is volatile, but its 13% annualized 10-year return ranks among the top 5% of all small-cap funds.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.