Nowadays the stock market is creating new heights and investors are confused as to understand where they should expand their investment from now. In such a time, equity funds with a value strategy are the best chance. Value funds strategy help you to invest in a portfolio of stocks that bear lower downside risk and still provide strong returns over a longer period.
2. Meaning of Value Fund
In Value fund strategy mutual funds invest in stocks which are undervalued. The underlying assumption is, stocks may be undervalued because of temporary elements and it expect higher returns as compared to a companion once the valuation is at par. Value funds strategy will give reward only over a longer period. It need time for the market to identify hidden possibility and then lift the stock.
3. Key Features of Value Fund
- Performance of Value Fund in Market up downs: At the of bullish market, Value fund will well underperform. Because the set of favored stocks or sectors boost quickly, they will not be available cheap and then will not be part of value fund’s portfolio. Similarly, it already holds stocks that are down, they will not fall by much when markets fall.
- To whom value fund is suitable: Value fund investor needs patience and it is suitable for moderate risk investors. If you hold a value fund, you should be prepared to face temporary sessions of underperformance.
- Invest in stock that are available at discount: Value fund primarily invests in stocks that an investor believes are selling at a price that is low in relation to earnings or other fundamental value measures. In simple terms, the value investors or fund managers are looking for stocks selling at a "discount;" they want to find a bargain. These investors or managers often employ the fundamental analysis approach to researching and analysing corporations to determine if the stock (s) should be purchased - to see if it's a "good value".
- Average Dividend: Value stocks usually have above-average dividend yields and low P/Es. SEBI has now created a separate category of Value Funds which will completely focus on this style of investing. They don’t have any restriction in investing though and will work like Multi-Cap Funds. This category has some very good performing funds such as ICICI Prudential Value Discovery Fund, HDFC Capital Builder Value Fund, Aditya Birla SL Pure Value Fund, Quantum Long Term Equity Value fund, etc.