From the October 2006 issue of Entrepreneur

Lately, a lot has been written about quant funds and how computers can do a better job than humans in selecting stocks for a fund's portfolio. However, be wary, because not all quant funds are the same, and humans write the computer programs, after all.

To keep things simple, there are three things investors need to know about quant funds: what they are, how they are managed and to whom they are best suited.

Quant funds are funds in which a mathematical, computer-driven model selects stocks for a fund's portfolio. This quantitative, or "quant," model typically varies from fund to fund and is tweaked over time.

Around for more than a decade, most top-performing quant funds today have a value bent. Some use formulas leaving very little room for human input, while others may be less automatic, combining both the quantitative and qualitative-math and minds.

The one constant among quant funds is that they take a disciplined approach to investing, limiting risks. "Emotional risk is not nearly as high with a quantitative investment methodology," says Bob Straus, chief investment officer at ICON Advisers Inc.

Because models can miss market trends and news, quant funds may not perform as well as expected. So, make sure to do your homework before investing.

Dian Vujovichis an author, syndicated columnist and publisher of fund investing sitewww.fundfreebies.com.