Look beneath the label. Make sure that a value fund isn't a growth fund in disguise. Several funds at the bottom of Morningstar's value list had managers that were too eager to jump on the big-tech bandwagon last year. It's really a growth fund with a good number of tech-related stocks in its portfolio, he says. Launched in September 1998, the fund also contains a fair share of energy, financial services, heath services and biotech stocks.
Fewer stocks have a greater impact.
He may have added that fewer holdings mean more risk. Morningstar categorizes funds twice a year based on portfolio holdings over the prior 36 months. Whether you're searching for a value fund or a fund in some other category, it's always a good idea to read analyst reports, look at the fund's prospectus or visit its Web site to make sure the fund strategy hasn't changed radically since it was last reviewed by popular fund data services like Morningstar. Value fund managers who are just now complaining that they haven't been reclassified as growth fund managers want it both ways, though. They outperformed their value fund peers in the bull market by loading up on tech, and now they want to switch to the growth fund category so they can look better than their peers once again.