From Value Investing to Value Funds: Discovering the Top Five Best-Performing Value Funds Inside!

Selecting a portfolio of four to five mutual funds from the vast array of options can be a challenging task. To simplify the process, a good starting point is to identify the appropriate mutual fund categories. Today, we’ll delve into the world of Value Funds, a subset of equity mutual funds. We will explore what they entail, things to consider before investing, and identify some of the top-performing Value Funds available.

The concept of Value Investing was pioneered by Benjamin Graham and subsequently gained prominence through the successful practices of renowned investors like Warren Buffett and Peter Lynch. The achievements of these seasoned investors thrust the idea of value investing into the spotlight, making it a pivotal component of various investment strategies.

Understanding Value Funds:

Value Funds are a category of equity mutual funds rooted in the principles of “Value Investing.” This approach involves selecting stocks perceived to be trading at prices lower than their intrinsic or fundamental value. In essence, Value Funds seek out companies whose stock prices may not accurately reflect their true worth, with the aim of realizing long-term growth potential as the market recognizes their underlying value.

The fund manager conducts thorough research and selects stocks they perceive to be undervalued. Their expectation is that, over time, the broader market will recognize the true value of these stocks, leading to an increase in their prices.

Considerations before investing in Value Funds:

If you’re keen on value investing but lack the necessary knowledge or time to identify undervalued stocks on your own, Value Funds present a viable option. However, before you commit, it’s essential to be aware of the following factors:

1. Long-Term Focus: Value Funds are designed for long-term investments. Undervalued stocks may require time for the market to recognize their true potential. Consequently, these funds may not be well-suited for short-term gains.
2. Value Funds are not Small Cap Funds: It’s a common misconception that value investing exclusively involves buying cheap or penny stocks. In reality, most Value Funds maintain diversified portfolios that encompass a substantial presence of both large and mid-cap companies.
3. Diversification: It is better to avoid over-committing substantial portions of wealth to Value Funds. Their short-term performance can exhibit significant volatility, and their long-term success heavily relies on the quality of research and stock selection by the fund manager. Therefore, it’s advisable to limit your investment in such funds to no more than 15% to 20% of someone’s portfolio.

Top five Value funds in India 2023:

These funds are appropriate for investors with a deep understanding of macroeconomic trends who are inclined to make targeted investments in pursuit of higher returns compared to other equity funds. However, these investors should also be prepared for the potential of experiencing moderate to significant losses in their investments, even in scenarios where the overall market is performing well.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.