What are Value Mutual Funds?

Value mutual funds are those that invest in companies with strong fundamentals and steady earnings histories.

A Value Mutual Fund’s portfolio will typically consist of stocks that are considered to be undervalued and expected to pay out dividends. The stocks held in such funds usually have P/E ratios in-line with or lower than the S&P 500 index, and such companies are usually older and well-established.

There are more vigorous criteria for defining Value Funds and Value Stocks, but every company has their own proprietary system for evaluation. Value funds are on the other side of the spectrum from Growth funds, where growth funds hold stocks with high P/E ratios and no dividend history, generally.

Both investment styles have experienced some success over the benchmark in certain time periods and sectors, but there is generally no statistically relevant advantage to be gained by choosing one over the other.

In certain market conditions it may be more advantageous to take a Value position instead of a Growth position. Growth funds will generally underperform the market in bearish conditions and outperform it in bullish conditions.

This may require a higher risk tolerance and longer time horizon than Value funds. Blend funds combine the two strategies. Core funds invest in the companies that are neither growth nor value picks.

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