If you lean toward value investing, one of the things you look
for is a low price-to-earnings, or P/E, ratio--but it may not make
sense to find those stocks whose P/Es are at their lowest
historical level. Such stocks may have sunk for a reason, and they
may be slow in returning to health. Instead, consider stocks with
P/Es that are low relative to companies in the same industry but
have had positive earnings in recent quarters. These stocks are
more likely to rebound and make money than those that are really in
the bargain basement.
The same goes for evaluating a mutual fund. While the names of
some funds suggest they are value types, they may be investing in
many momentum stocks (any fund that performed well in 1998, for
example, had a large dose of technology stocks in it, no matter
what the fund was called). Check its annual reports to be sure your
fund provides the style you seek.