September 14, 2006 10:29 AM
What Is Value Fund?
These funds like to invest in companies that the market has overlooked. Managers like Marty Whitman of Third Avenue Value search for stocks that have become "undervalued" -- or priced low relative to their earnings potential.
Sometimes a stock has run into a short-term problem that will eventually be fixed and forgotten. Or maybe the company is too small or obscure to attract much notice. In any event, the manager makes a judgment that there's more potential there than the market has recognized. His bet is that the price will rise as others come around to the same conclusion.
Whitman, for instance, bought real-estate insurance company First American Financial early in 1997 before it was discovered by the Street. The stock rose 96% in 1998 and still traded at just 9.5 times the past 12-month earnings -- a steal when you consider the market average at the time was more like 22 times earnings.
The big risk with value funds is that the "undiscovered gems" they try to spot sometimes remain undiscovered. That can depress results for extended periods of time. Volatility, however, is quite low, and if you choose a good fund, the risk of doggy returns should be minimal. Also, because these fund managers tend to buy stocks and hold them until they turn around, expenses and turnover are low. Add it up, and value funds are most suitable for more conservative, tax-averse investors.
Source: Yahoo!11/21/06 | Featured Fund: Vanguard Wellington (VWELX)
11/18/06 | Target-Date Funds Launched at American Funds
11/13/06 | Mutual Fund Investors: $20 Billion Tax Bomb On The Horizon
11/13/06 | Mutual Funds Pass $10 Trillion Mark In Assets
11/01/06 | Is Bill Miller's Lucky Streak About To Be Over?
10/31/06 | International Fixed Income Fund Recommendations
10/23/06 | 10 Best Domestic Equity Mutual Fund Managers
10/22/06 | The Cost Of Market Timing In Mutual Fund Investing
10/20/06 | Is Bill Gross's Winning Streak Coming To A Close?
10/20/06 | Kiplinger's Pick Of Best Mutual Funds
10/17/06 | Ford 401(k) Plan To Drop Fidelity Magellan
10/15/06 | What Are Insurance Bonds?
10/15/06 | What Are Superannuation Funds?
10/15/06 | What Are Unit Trusts?
10/15/06 | What Is Group Investment Fund?
10/15/06 | What Are Managed Investments?
10/15/06 | Mutual Fund Investors: Be Prepared For Your Tax Bite
10/10/06 | Many Fund Manager Changes At Fidelity
10/10/06 | Which Fund Companies Are Really Thinking Long Term?
10/10/06 | Fidelity Reduces Initial Minimum On Its Doner-Advised Charitable Fund
10/08/06 | Bond Funds Have Their Own Risks
10/08/06 | Fidelity's Large Funds Lag The Market (FMAGX, FCNTX)
10/08/06 | Longleaf Funds Are Reopened To Investors
10/06/06 | Biggest Fund Exodus in 2006
10/05/06 | Morningstar Fund Pick: Fidelity Balanced (FBALX)
10/05/06 | Morningstar Small-Value Fund Picks
10/05/06 | Morningstar Large-Value Fund Picks
10/05/06 | Morningstar Mid-Value Fund Picks
10/03/06 | What Is A Mutual Fund's R-Squared?
10/03/06 | What Is A Mutual Fund's Redemption Fee?
10/03/06 | What Is A Mutual Fund's Net Asset Value (NAV)?
10/03/06 | What Is A Mutual Fund's Turnover?
10/03/06 | What Is 12b-1 Fee?
10/03/06 | What Is A Mutual Fund's Beta?
10/03/06 | What Is A Mutual Fund's Load?
10/03/06 | What Is A Mutual Fund's Alpha?
10/03/06 | What Is Mutual Fund's Expense Ratio?
10/03/06 | Best Fixed-Income Funds And Managers
10/01/06 | Morgan Stanley Launches First China A-Share Fund
10/01/06 | International Stock Fund Managers Fail To Beat Index
09/28/06 | 2006 Best Mutual Funds From USA Today - Moderate Funds
09/28/06 | 2006 Best Mutual Funds From USA Today - Conservative Funds
09/28/06 | 2006 Best Mutual Funds From USA Today - Aggressive Funds
09/20/06 | Three Great Mutual Funds For Global Exposure
09/19/06 | How To Buy Mutual Funds
09/19/06 | Fund Scandal Payouts Likely To Be Small
09/14/06 | What Is Money Market Fund?
09/14/06 | What Is Foreign Stock Fund?
09/14/06 | What Is Growth Fund?
09/14/06 | Different Types of Bond Funds
09/13/06 | Nine Stellar Funds That Beat The Market
09/12/06 | Sure Ways To Improve Mutual Fund Investment Returns
09/11/06 | Money Magazine: Best Foreign (International) Stock Funds for 2006
09/11/06 | Money Magazine: Best Bond (Fixed-Income) Funds for 2006
09/11/06 | Best Index Funds For Every Thing
09/11/06 | Money Magazine: Best Small-Cap Stock Funds for 2006
09/11/06 | Money Magazine: Best Large-Cap Stock Funds for 2006
09/11/06 | Money Magazine: Best Mid-Cap Stock Funds for 2006
09/11/06 | Be Careful With "Life Cycle" Funds
09/11/06 | Socially Responsible Funds
09/11/06 | Good Questions For Target-Date (Lifecycle) Funds
09/10/06 | Money Funds Are Gaining Ground
09/10/06 | Understanding Mutual Fund Classes: Class C
09/10/06 | Understanding Mutual Fund Classes: Class B
09/10/06 | Understanding Mutual Fund Classes: Class A
09/10/06 | Morningstar Pick: Fidelity Spartan 500 Index Investor (FSMKX)
09/10/06 | Morningstar Pick: Dodge & Cox International Stock (DODFX)
09/10/06 | Finding The Right Foreign Fund
08/26/06 | Fund Exodus: The Biggest Fund Outflow in 2006
08/24/06 | Three Funds Trump the Bond King
08/23/06 | Kiplinger 25: Best Bond Funds
08/23/06 | Kiplinger 25: Best Specialized Funds
08/22/06 | Kiplinger 25: Best International Stock Funds
08/21/06 | Kiplinger 25: Best Large-Cap Value Funds
08/21/06 | Mutual Fund Managers Become Pessimistic
08/20/06 | Kiplinger 25: Best Large-Cap Growth Funds
08/20/06 | Kiplinger 25: Best Small and Midsize Company Funds