There may be little cause for celebration in the stock market these days, but investors in value-focused mutual funds have reason to feel the tiniest bit smug -- if only because they've lost less than the folks who stuck with growth.

It's not easy to be philosophical about losing money, but putting your losses in perspective may help you feel better. July was a dismal month for mutual funds all around, with domestic equity funds falling an average of 4.9 percent, according to Standard & Poor's, a provider of independent investment research, ratings and indexes. Small-cap growth funds suffered the worst, plunging 8.9 percent, while large-cap value held up the best, shedding only 2.5 percent.

The average equity fund has fallen 1.2 percent so far this year. But value stocks, which tend to be in more established and dependable market segments, have enjoyed an edge over other investment styles. While small- and mid-cap value equity funds have been 2004's leaders so far, cautious investors are gravitating toward less volatile large-cap value funds, where the ameliorating effects of dividends may offset the bruising many believe is still to come.

"Preservation is on the minds of everyone we talk to now," said Percy E. Bolton, a fee-only financial planner in Pasadena, Calif. "Growth stocks and small-cap stocks are extremely volatile, so what you're telling your client if you put them in that position is, 'The pain may be extreme. . . . Can you take it?' And most of them are saying no."

There is already a great deal of pessimism in the market, which has been weighed down by climbing oil prices and anxieties about inflation, interest rates, terrorism and the upcoming election. Of the 10 sectors in the S&P, seven have posted declines in recent weeks. The three that didn't -- energy, health care and utilities -- had average increases of less than a quarter of a percent.

On top of that, the third quarter is typically a rough time, said Sam Stovall, S&P's chief investment strategist. Going back to 1990, the S&P 500 has declined 2.4 percent during this period. There are several reasons, including the fact that people simply aren't adding to their investments the way they do at the beginning and the end of the year, when retirement accounts usually get an infusion of cash, or during spring tax time, when refunds roll in. Late-summer trading volume tends to be lighter, which limits market gains, and companies that need to revise earnings often do so in the second half of the year.

So the situation isn't pretty. But market experts say it would be a mistake to sell off your equity funds now, especially if you are dollar-cost averaging, meaning adding to your investment on a regular basis regardless of where the market goes. By keeping up your strategy through this lull, you'll wind up buying shares at lower prices. If you think you must do something to help protect your portfolio, however, leaning toward value is a safe tactic.

"Value stocks have a higher dividend payout, less volatility and a lower valuation," Stovall said. "So they're cheaper, they pay you more, and they wiggle less. If you can rotate, if you have the ability in your retirement account, in your 401(k), to embrace higher-dividend-paying, higher-quality stocks, then now might be the time to be doing that."

Large-cap value funds may not be the most exciting investment, but their returns are steady -- actually equal to growth over the long haul. And their dividend yields can be an important source of income in down markets. For a risk-averse investor who may still be smarting from the losses that followed the tech bubble and the Sept. 11, 2001, terrorist attacks, that sounds pretty appealing, Bolton said.

"If you are conservative and you want to be in the market, large-cap value is the safest position," Bolton said. "Only companies that are profitable can pay dividends. Value managers do extremely well in bad markets, so if your expectation is that the market is going to continue to be a difficult place to be, then that's what you should own."

Bolton also advised against lowering your contribution to your investment during bad times, because you never know when the next upward move will come. Many people who left the market after being burned in the last downturn missed the stellar gains of 2003, which might have replaced much of what they'd lost.

"That's how the market works," Bolton said. "It does not tell you when it's going to make you money. You have to sit there and be patient. It's like a train ride. Until you get to your destination, you don't get off. You may change your seat, but you stay on the train. Because you know if you get out and walk, it'll take you a lot longer to get where you're going."