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Business News/ Mutual Funds / Mutual Funds: Monthly SIP of 4,000 in this value scheme since inception would have grown to 1 crore
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Mutual Funds: Monthly SIP of ₹4,000 in this value scheme since inception would have grown to ₹1 crore

These mutual funds refer to the schemes which follow value investment strategy, with at least 65 percent investment made in stocks. These funds identify stocks that are currently undervalued but are expected to perform well over time as the value is unlocked.

Since the launch, Tata Equity P/E Fund has delivered an annualised return of 18.3 per cent, thus letting a total investment of ₹9.52 lakh to grow to ₹99.24 lakh, i.e., nearly ₹one crore. Premium
Since the launch, Tata Equity P/E Fund has delivered an annualised return of 18.3 per cent, thus letting a total investment of 9.52 lakh to grow to 99.24 lakh, i.e., nearly one crore.

Before investing in a mutual fund, investors invariably examine the past returns delivered by the scheme. Unlike in a stock where growth potential can be gauged by the performance of one company and its management, a mutual fund’s performance is a function of several factors, including the performances of all the companies in which the mutual fund has invested.

This is one of the key reasons for which the mutual fund’s past performance gains a lot of significance. And at the time of examining the past returns, it is advisable to check the historical returns of a number of years and compare them holistically over a period of time to gauge the possibility of returns one can earn in future.

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Here, we randomly select one value mutual fund — Tata Equity P/E Fund — which has delivered healthy returns in the past 19 years across different time periods, particularly via systematic investment plans (SIP) investment. Let us first understand what a value fund is.

Value mutual fund

These mutual funds refer to the schemes which follow value investment strategy, with at least 65 percent investment made in stocks. These funds identify stocks that are currently undervalued but are expected to perform well over time as the value is unlocked.

Additionally, contra funds are equity mutual funds that take a contrarian view on the market. As per the SEBI guidelines, a mutual fund house can offer either a contra fund or a value fund, not both.

 Years  Annualised return (%) Investment madeMonthly 4,000 SIP grows to 
149.59    48,000 59,000
323.8      1.44 lakh          2.19 lakh    
518.77    2.40 lakh 4.68 lakh 
1018.37    4.8 lakh 13.77 lakh 
Since launch18.3 9.52 lakh 99.24 lakh 

(Source: Tatamutualfund.com, AMFI)

Returns since inception

As we can see in the table above, investing in this mutual fund gave 49 percent in the past one year. This means if someone had made a regular investment of 4,000 every month via SIP, it would have grown to 59,000 by making a total investment of 48,000.

Likewise, if an investor had continued with this SIP for a period of three years, the investment would have swelled to 2.19 lakh by making an investment of 1.44 lakh.

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Moving forward, if an investor had continued with the SIP for a period of five years, the investment would have grown to 4.68 lakh by making an investment of 2.40 lakh.

In a span of 10 years, the investment of 4.8 lakh would have grown to 13.77 lakh if you had invested 4,000 each month.

And since the launch of scheme, the investment has delivered an annualised return of 18.3 per cent, thus letting a total investment of 9.52 lakh to grow to 99.24 lakh, i.e., nearly one crore.

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However, it is vital to note that the historical returns do not guarantee a mutual fund’s future performance. Investors are, therefore, recommended to take an investing decision on the basis of a range of factors such as fund house’s reputation, category of scheme, macro economic factors and past performance of fund managers.

Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.

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Published: 25 Apr 2024, 04:08 PM IST
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