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&#39Style investing is an outdated trend&#39

Style investing is no longer the key to better performance, according to Merrill Lynch Investment Managers.

The fund firm believes the potential for superior investment performance by backing one style against another is coming to an end. It says the best way to make investments is through choosing the correct sector and stock.

The firm&#39s research reveals that styles change over time. It says technology now represents the biggest share of the growth markets while the value markets are dominated by financials, in a direct reverse of the 1990s trend.

It also claims that stock-specific factors remain the dominant factor in determining returns and that small stocks outperform big stocks over the long term.

Head of asset allocation and economics Richard Turnill says: “Investors should be cautious of simple mechanical rules that make investment performance look easy. Merrill Lynch Investment Managers&#39 view is that while different styles of investing offer tactical opportunities over the course of the economic cycle, no style can be expected to have persistently superior returns over the long run.”

Head of global research and investment strategy, Cameron Watt says: “We continue to believe the lion&#39s share of outperformance is generated by stock selection.”

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