Investing in value funds

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Stocks that seem to be undervalued and/or pay a dividend are often targets for value investors. Such investors believe that it is possible for the market to overlook deep quality stocks. Value investors believe that the value of these stocks will eventually rise to the top like fat in soup.

Typically value stocks have low Price to Earnings ratios. But this is not always the case,

Typically value stocks pay a dividend. But this too is not always the case.

Warren Buffett is the most famous of all value investors, if not investors generally. He focuses on buying good companies when he perceives the stock price to be good relative to the inherent value of a company. He looks for a good deal. He doesn’t play momentum. He looks for good bones in any company he gets involved with.

John Templeton was another famous value investor. He made his money buying up good stocks that had been battered by the Great Depression and World War II. He saw that many international stocks had deep value. He could see that many of these companies had what it took to succeed in less perilous times. He was right and built $10,000 into hundreds of millions.

Value funds are a good choice generally for many investors, because they “pay you while you wait.” In other words, a company’s stock may not go up much in value over a period of time but it will pay you a dividend in the meantime.

Value stocks tend to be less sexy than the high fliers. But for many people “steady Eddie” dividend earnings sound pretty good. Sound’s pretty good to me right now.


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