If a "Value Fund" consists of Company's that fund managers believe to be at a discount, what happens when a company's stock price goes up and no longer considered "at a discount"? Do they continue to hold those company's, or replace them with another "value" stock at a certain point? Seems counterintuitive to me.
Posted by MrEZ3
2 Comments
They sell if it’s done its job and put the capital to work in another opportunity. Keep in mind, these funds are usually part of a balanced portfolio, so selling out of that fund doesn’t necessarily mean the overall portfolio would lose exposure if it’s constructed properly.
They do indeed replace them with a different stock at some point. Depending on how the fund works they may consider other factors such as momentum to keep the stock in the fund a little bit longer and capture more of its rise.