I use valueresearchonline.com for analysing my portfolio. The tool has slotted my portfolio in the 'blend' column of the style box. What does this mean? I do understand the difference between large-, mid- and small-cap. But if possible, please clear all the points relating to the style box.
-Raj Kumar Jain
If you look at the Style Box, you will find that it tells you the market-cap bias of your portfolio. Since you say that you are very clear on that front, we shall not delve into it. Your confusion seems to lie in the investing style aspect. On the x-axis of the style box, three types of investing style are specified - growth, value and blend style. A fund or portfolio tilted towards growth will lie in the left column of the matrix while a value tilt will appear in the right column. If the focus of the portfolio is a combination of both, it is referred to as blend.
Fund managers follow two fundamental approaches to stock investing called growth or value. Growth investing entails looking for companies that have the potential to grow faster than others. The optimism is reflected in the premium valuation commanded by the market price of such companies. A value investor, on the other hand, buys undervalued stocks that have a potential for appreciation, but are usually ignored by the investing community.
Growth stocks do well during periods of rapid economic expansion, while value stocks typically perform well during market downturns or in the initial stages of market recovery.
Growth and value investing are, however, not static concepts. When the value in a value stock is realised, it doesn't remain a value stock. Similarly, when growth stock stops growing or its share price falls substantially, it may have a lot of 'value' in it. Of course, neither style of investing comes with any guarantees. But by picking up funds that utilise both styles, you can reduce your chances of a significant loss from any fund during bad times. If you are a new investor, it would be better to focus on a large-cap, blended portfolio.