Value Fund

Value Fund

A mutual fund that primarily holds value stocks, stocks deemed to be undervalued in price.

Notes:

There are numerous examples of value funds. Every large mutual fund family has a value fund component, which 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 the 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 low P/E stocks. Although this can be a characteristic of an undervalued company, this is not the sole feature that astute value investors seek.

See also: Book Value, Family of Funds, Intrinsic Value, Mutual Fund, P/E Ratio, P/B Ratio, Value Stock