Value Fund

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DEFINITION of 'Value Fund'

A stock mutual fund that primarily holds stocks that are deemed to be undervalued in price and that are likely to pay dividends. Value funds are one of three main mutual fund types; the other two are growth and blend (a mix of value and growth stocks) funds.

INVESTOPEDIA EXPLAINS 'Value Fund'

Every large mutual fund family has a value fund component in which funds are often broken down by size. For example, a fund family may include small-, mid- and large-cap value funds for investors to choose from. The premise of value investing is that the market has inherent inefficiencies that enable companies to trade at levels below what they are actually worth. In theory, once the market corrects these inefficiencies, the value investor will see the share price rise.

A common misconception is that value investors simply seek out stocks with low price/earnings ratios. Although this can be a characteristic of an undervalued company, this is not the sole feature that astute value investors seek.

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RELATED FAQS
  1. What makes the chemicals sector attractive to value investors?

    The chemicals sector is attractive to value investors because it is a capital-intensive sector that can become grossly undervalued ... Read Full Answer >>
  2. What can cause an asset to trade below its market value?

    An asset may trade below its market value due to a lack of demand for the asset in the marketplace, a perception or belief ... Read Full Answer >>
  3. How do no-load funds typically perform relative to load funds?

    No-load mutual funds are pooled investments that do not carry an upfront sales charge when purchased or a deferred sales ... Read Full Answer >>
  4. What are the most popular mutual funds that invest primarily in the insurance sector?

    Under the purview of the financial services industry, the insurance sector is an attractive investment option for mutual ... Read Full Answer >>
  5. How should I use portfolio turnover to evaluate a mutual fund?

    The portfolio turnover percentage can be used to determine the extent to which a mutual fund turns over its stocks and assets ... Read Full Answer >>
  6. What's the difference between the coverage ratio and the liquidity coverage ratio?

    Investors and analysts use coverage ratios to determine a company's ability to meet its financial obligations. The liquidity ... Read Full Answer >>
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