There are two ways in which growth and income mutual funds are managed. One is growth or momentum-style management and the other is value-managed.

According to Financial Planner Martin B. Lauder, CFS, growth-style managers look for what’s hot in the market. They usually keep their holdings for less than 1 year, causing a high frequency of turnover in their portfolios.

During the last 3 years, most of the profits of high-performance mutual funds were earned by those funds that used a growth management style.

Value-style managers continually look for stocks that are undervalued in relation to their earnings or book value. The stock could be undervalued because the company might be considered out of fashion, or it could simply be overlooked by the market.

Value–style managers usually maintain the holdings in their portfolios for a year or more. Since the stocks of the companies they purchase are undervalued, it takes longer for the market to recognize these hidden winners. At the same time, they’re less likely to drop in value than their more aggressive counterparts.