Value funds: the flavour of the season

In simpler terms, the Value Fund is typically a fund which tends to follow a thorough value investing strategy and finds undervalued stocks to invest in. This type of fund is usually chosen as a long-term allocation which requires patience and persistence on the part of investors to enjoy steady growth over time. Market capitalization is one of the sought-after categories of breaking down the Value funds from which investors decide their most suitable pick.

The reason why value funds are the flavour of the season:

The key features and benefits of value funds make them the flavour of the season.

Let’s take a look at the points below that highlights the features in details:

  • Diversification: Value funds tend to offer diversity to an investor’s investment portfolio that has a major share of growth-oriented funds and it also provides a strategic investment scope to them. Since the different type of investment strategies work differently in different market conditions, facilitating diversification across value and growth based investment tend to ensure that at least one part of an investor’s portfolio does well all the time.
  • Better protection: Investing in Value funds is deemed as a safe and less vulnerable option during a volatile market and the basic reason for it lies in the fact that the investor doesn’t really have a lot of expectation from the stock they have invested in. This means value-based investments tend to show a lower downside when compared to the rest of the market. Such investments focus more on the stocks that are most likely to be unflavoured and cheaper than others.
  • Well-known strategy:The value funds adopt the value investing strategy which is regarded as one of the most successful and well-known strategies of equity investment all over the world. Though many Indian investors harbour doubt about the success of value funds in the economy that is primarily growth-oriented, records show that such a strategy of investment has earned decent returns throughout various market cycles and in fact has been working out quite well.

The following points highlight the benefits in details:

  • Investors who put their money in value funds can access the various benefits of devalued assets even in a panic-stricken market. As the popular market trend, herd mentality and unnecessary hype don’t affect the investors who are rigorously following the value investing strategy.
  • The external factors don’t affect the value fund investors because their value based strategies help them to focus their energy towards their financial goal and not on the external forces. It also helps them to stay focused amidst a volatile market and volatile price fluctuations.
  • Investors who put their money in value funds are likely to experience steady and regular earnings that may turn out to be better when compared to most other strategic investment tools.

Before investing in value funds it is extremely important to know about their characteristics and how they function in different situations. Consult our professional analysts and value managers to avail their assistance for choosing the best stocks for value funds.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns. Wealth Redefine is a AMFI registered Mutual Fund distributor – ARN - 167127

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