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Follower ○○

Value Investing

Value investing seems to have been out of favor for many years from what I hear. I have many growth mutual funds but would like to find a good value fund to invest in. I am limited in my 403b account to buying only mutual funds. Seems to me many value funds have a portion of their investments in bonds, which to me seem like maybe not such a great idea with rates as low as they are and at some point when rates start to rise wouldn't that be bad for bonds and mutual funds holding bonds? So my thoughts are I should be looking for a mutual fund that buys stocks with good cash flows, good balance sheets, and are of good value. Something to offset my mostly growth mutual funds portfolio. Am I missing something not wanting bonds in the value fund? Are there any suggestions as to what mutual fund would be a good value fund? Thanks in advance.

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Valued Contributor

Re: Value Investing

Many allocation/balanced funds have value tilt and those have some % in bonds.

But most value funds [including equity-income funds] are almost 100% equity.

Post a list of funds available in your 403b.

IMO, have a mix of growth and value funds or just the blend funds.

YBB
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Follower ○○

Re: Value Investing

My 403b account is with TD Ameritrade so I have many choices. Our 403b plan with Lincoln Financial allowed us to move money to TD Ameritrade to offer us more choices but only allow us to invest in mutual funds. Am I misguided thinking having bonds in a value investment mutual fund not a good idea because of how low rates are? Thanks Yogi !

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Explorer ○○○

Re: Value Investing

I hesitate to make any specific recommendations, given that my own choices have done so badly in this market drop. But I have some comments. 

On the one hand, you could consider a hard-core value fund that stays fully invested and doesn't stray very much from value stocks. Most of those are going to look pretty ugly right now. They've been just hammered. Examples would be DODGX for US stocks or OAKIX for international stocks. (Those are also examples of ones that I own.) Most people are going to find it difficult to recommend funds like that right now. 

On the other hand, you might consider funds that just happen to lie in the "Large Value" style box right now, yet are more flexible in some way. For instance they might allow themselves to build up large cash stakes if they don't find anything very compelling, or to drift out of the "Large Value" style at times and invest in more expensive stocks. Probably, the "value" funds that look better based on past performance are going to be mostly of this type. An example of that would be YACKX. 

I think it is likely that funds of the latter type will seem better right now, and in fact that might be better at least in the short run. However there's a good chance that funds of the first type will do better over the long run. I'd expect them to bound back pretty strongly once the market starts to rise again. I remember something like this happened back in 2008-9. The funds that many were interested in back in 2009 didn't end up being the best long run investments. For instance one I remember many people recommending was FPACX. If you plot a 10 year chart comparing FPACX and DODGX you'll see what I mean. (Perhaps not a totally fair comparison since FPACX holds significant cash/bonds at all times. But it is one I remember being strongly recommended as a good fund choice back in 2009.) 

Of course it is hard to go wrong with the index fund approach, e.g with something like VIVAX. 

Another comment: I do intend to add to my value stock funds. But I am going to wait until their downward momentum shows signs of stopping. I'm still thinking about what criteria to use. But the absolute minimum would be for the price to rise above the 20 day moving average. I say that because I've been burned before by buying too early. Downward momentum is pretty strong right now. You might consider something like that. 

 

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Valued Contributor

Re: Value Investing


@Rascal wrote:

Value investing seems to have been out of favor for many years from what I hear. I have many growth mutual funds but would like to find a good value fund to invest in. I am limited in my 403b account to buying only mutual funds. Seems to me many value funds have a portion of their investments in bonds, which to me seem like maybe not such a great idea with rates as low as they are and at some point when rates start to rise wouldn't that be bad for bonds and mutual funds holding bonds? So my thoughts are I should be looking for a mutual fund that buys stocks with good cash flows, good balance sheets, and are of good value. Something to offset my mostly growth mutual funds portfolio. Am I missing something not wanting bonds in the value fund? Are there any suggestions as to what mutual fund would be a good value fund? Thanks in advance.


IMO, it's virtually impossible to become a 'value investor' in the sense of Graham/Dodd and Warren Buffet using open ended funds.  It's also my opinion that the only investors who come close to the practice are those who post on the Dividend & Income Board, and have been doing so for the last 2 decades.  No other forum has so many posters who hold portfolios of individual stocks as the MAJOR (not just play money) part of their portfolio.

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Participant ○

Re: Value Investing

  Somebody told me that value funds have less draw downs in down markets.   VASVX lost 45% in this rout.   Just as with inflation, I will take value funds seriously when there is a definite upswing.  I am OK if I miss a 10% upswing in Value /Growth.  Until then it is better to just invest in blend. 

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Explorer ○○

Re: Value Investing

VEIPX has been one of my core holdings for years.

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