Equity Style Box

An equity style box is a visual representation of the principle investment characteristics of stocks and stock mutual funds. The style box was created by Morningstar and is a valuable tool for investors to use to determine the risk-return structures of their stocks/stock portfolios and/or how these investments fit into their investing criteria.

An equity style box is composed of nine squares, or categories, with the investment features of stocks/stock mutual funds presented along its vertical and horizontal axes. Institutional investment managers will use equity style box categories as a central consideration for their portfolio management objectives. Investors of all types can use equity style box categories to screen stocks and mutual funds for individual investing characteristics.

For stocks and stock funds, the vertical axis is divided into three company-size categories based on market capitalization: large, medium and small. The horizontal axis represents investment style and varies slightly for stocks and stock funds. Both stocks and stock funds include value and growth categories. For stock investments, Morningstar classifies the middle category, which can generally be considered as a mix of value and growth, as core for stocks and blend for funds. Investors will often see these categories used in stock reports and mutual fund marketing materials.

Investors use equity style boxes to identify specific stocks or stock funds for targeted investment portfolio allocations. Risk factors can typically be an important consideration when filtering for investments by style box. Small-cap stocks and growth stocks generally report higher risks with higher potential return. Large-cap value stocks are often a low-risk choice for investors seeking long-term investments. The blend category will include funds that have a mix of growth and value stocks. For stocks, the core category refers to investments that can be good long-term holdings offering consistent capital appreciation potential.

Morningstar allows investors to filter funds by equity style box category. A mutual fund investor looking for relatively safe equity investments with the highest potential return could filter for funds in the large-cap/growth category.

In 2017, emerging market equities and specifically equities in China reported some of the growth market’s highest returns. For the one-year period through January 12, 2018, the Columbia Greater China Fund is reported as one of the top investments in the large-cap/growth style box with a return of 65.89%. This fund invests primarily in companies in the Greater China Region, including Hong Kong, the People's Republic of China and Taiwan. Total return for the Fund includes its dividend, which is paid annually. As of January 12, 2018, the Fund reported a trailing twelve-month dividend yield of 0.53%.