Value Line Mutual Funds

Value line mutual funds are a type of mutual fund that is comprised of stocks that have been undervalued by the industry. The return is made when the industry corrects this valuing error. These errors crop up because the market has inherent inefficiencies where companies trade at levels below what they are actually worth.

Value fund managers look for mature companies with ample cash, and a proven track record of paying dividends. This makes the value line mutual fund a safer mutual fund to invest in. They are interested in slow, long-term growth. Because of this, they tend to have outperformed growth funds during weak economic periods.

The main strategy for these funds is to concentrate on common stocks, or securities that can be converted into common stocks. Since obtaining current income is secondary to long-term growth, when conditions warrant, part of these funds' assets may be invested in short-term indebtedness, debt securities, bonds or cash. The fund managers may even purchase the occasional preferred stock.

How do they perform? The industry experts are not in agreement. Some say that they perform admirably. While others comment, that in theory they should do well, but there are no guarantees. It is impossible to predict when or how the market will correct these valuing errors. Also, it is difficult to know in advance how market conditions will play out in the bigger picture. Everything has to be just right before these funds will increase in value.

Ultimately, it is up to the investor to do his research. Look into the company's background. Do they have a good track record? How long have they offered a particular mutual fund?

What kind of growth does the company guarantee? Is it reasonable? Be wary of funds that are guaranteeing consistent returns unaffected by the economy. In today's market, those types of funds do not exist, and probably never did. While value line mutual funds can minimize the effects, they cannot stay unaffected.

These funds are designed for the cautious investor. When all plays out correctly, the funds will provide slow, even returns. This is very appealing.