When smart investors are looking for the best value funds to hold, they’re thinking about solid, long-term investments that can provide strong returns years down the road, not the best performers of the moment.
The best value investors know that time may be their best tool for long-term success. Arguably, the most successful investor that ever lived, Warren Buffet is well known for his value investing style, but also for his investing philosophies. Here are a few pieces of his sage advice:
- “Our favorite holding period is forever.”
- “Only buy something you’d be perfectly happy to hold if the market shut down for 10 years.”
- “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
So, with this thinking in mind, and in no particular order, here are seven of the best value funds to hold forever.
Best Value Funds to Hold Forever: Vanguard Windsor Fund Investor Share (VWNDX)
Expenses:0.30%, or $30 annually per every $10,000 invested
Minimum Initial Investment:$3,000
One of the best value funds on the market, Vanguard Windsor Fund Investor Share (MUTF:VWNDX), is also one of the oldest funds on the market.
Since this mutual fund’s inception in 1958, VWNDX has averaged an annualized return of 11.4%, which any smart value investor would love to have for a “forever return.”
The management team at Wellington Management Company have been successful with buying and holding a mix of value stocks, primarily consisting of U.S. large-caps like Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C), and American International Group Inc (NYSE:AIG).
Best Value Funds to Hold Forever:Dodge & Cox Stock Fund (DODGX)
Expenses:0.52%
Minimum Initial Investment:$2,500
Value investors who know anything about mutual funds will include Dodge & Cox Stock Fund(MUTF:DODGX) in a list of best value funds.
With a 20-year annualized return of 9.2%, and a management team consisting of members at Dodge & Cox for over 30 years, DODGX is a fund that should be on every value investor’s radar screen.
Like many value funds, the DODGX portfolio allocates a large portion of assets to big financial stocks like BAC, Charles Schwab Corporation Common Stock (NYSE:SCHW), and Wells Fargo & Co (NYSE:WFC), the fund is well-diversified across sectors other than financial, such as health, technology, consumer discretionary and energy.
Best Value Funds to Hold Forever: Vanguard Value Index Fund Investor Shares (VIVAX)
Expenses:0.18%
Minimum Initial Investment:$3,000
If you’re like most value investors, you’re cheap and you’re a buy and hold investor, which means you’ll love Vanguard Value Index Fund Investor Shares(MUTF:VIVAX).
You can’t get much cheaper than VIVAX’s 0.18% expense ratio and the fund’s passive nature means extremely low turnover. This combination of cost and long-term holding has translated into a 9.6% annualized return since the fund’s 1992 inception.
If you look under the hood of VIVAX, you’ll find a plethora of big value stocks like Microsoft Corporation(NASDAQ:MSFT), Johnson & Johnson (NYSE:JNJ) and Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B).
Best Value Funds to Hold Forever:Fidelity Low-Priced Stock Fund (FLPSX)
Expenses:0.68%
Minimum Initial Investment:$2,500
Investors looking for mid-cap value stocks from around the globe are smart to take a close look at Fidelity Low-Priced Stock Fund (MUTF:FLPSX).
FLPSX invests primarily in stocks of companies with market values between $2 billion and $10 billion and the management team is not limited to U.S. equities. Recent top holdings for this mid-cap value fund include UnitedHealth Group Inc (NYSE:UNH), Ross Stores, Inc. (NASDAQ:ROST) and Best Buy Co Inc (NYSE:BBY).
If you are considering buying shares of FLPSX, keep in mind that the fund occasionally closes to new investors, as is the case with small- and mid-cap funds with responsible managers.
Best Value Funds to Hold Forever: American Funds Washington Mutual(AWSHX)
Expenses:0.58%
Minimum Initial Investment:$250
Another fund that has long been among the best value funds to buy, American Funds Washington Mutual (MUTF:AWSHX) is a staple among mutual funds.
Around since 1952, and an annualized return of 11.8% since its inception, AWSHX is arguably an important piece of value investing history. Although the fund is not consistently a top performer, value investing is not supposed to be exciting. Slow and steady wins the race here.
As the American Funds site description describes, AWSHX holds “the bluest of the blue chips” like top holdings MSFT, Home Depot Inc (NYSE:HD), and Boeing Co(NYSE:BA).
Best Value Funds to Hold Forever: Vanguard Dividend Appreciation Index Fund Investor Shares (VDAIX)
Expenses:0.17%
Minimum Initial Investment:$3,000
One of the best types of value funds to hold is dividend funds like Vanguard Dividend Appreciation Index Fund Investor Shares (MUTF:VDAIX).
VDAIX passively tracks theNASDAQ US Dividend Achievers Select index, which consists of about 180 stocks like MSFT, JNJ, andPepsiCo, Inc. (NYSE:PEP) that have a record of raising their dividends over time.
That means the current yield of this dividend fund will grow nicely over time. Thisincome objective is a common attraction for value investors.
Best Value Funds to Hold Forever: Vanguard High Dividend Yield Index Fund Investor Shares (VHDYX)
Expenses:0.15%
Minimum Initial Investment:$3,000
One of the finalists on our list of highest rated mutual funds, Vanguard High Dividend Yield Index Fund Investor Shares (MUTF:VHDYX) is a fitting way to end this list of best value funds to hold forever.
VHDYX possesses the key qualities most value investors love to see: it’s cheap, it’s passive, and it invests in high-yielding stocks like top holdings MSFT, JNJ andExxon Mobil Corporation (NYSE:XOM).
To hit a yield averaging around 3%,VHDYX tracks theFTSE High Dividend Yield Index, which covers about 400 stocks of U.S. companies that have a record of consistently paying above-average dividends.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. Under no circ*mstances does this information represent a recommendation to buy or sell securities.
