Mutual Funds: 5 best value-oriented funds gave over 27% return in past five years

Value investing seeks stocks priced below their intrinsic value. Value-oriented mutual funds achieve this by investing in such stocks, diversifying investments across various companies and sectors.

Abeer Ray
Published8 Jul 2024, 11:00 AM IST
Top 5 value-oriented mutual funds that have helped investors earn money from the market
Top 5 value-oriented mutual funds that have helped investors earn money from the market

If you admire renowned investors who often discuss the distinction between value and price, the concept of investing in value funds might already be familiar to you. The underlying logic is straightforward: These stocks are perceived as undervalued, and it may take time for the market to recognize their potential. Once their true worth is realized, these companies’ stocks can experience significant appreciation, yielding substantial returns.

Rather than simply seeking stocks priced below their intrinsic value, you might be inclined to allocate a portion of your earnings to value-oriented mutual funds. For the uninitiated, value mutual funds are a category of equity mutual funds that focus on investing in stocks considered to be undervalued relative to their intrinsic worth. Because these stocks may require time to appreciate, these funds are often seen as suitable for long-term investors. 

These funds are overseen by portfolio managers who utilize value investing techniques to pinpoint stocks that may be overlooked by the market yet hold promise for substantial long-term growth.

Also Read | Mutual Funds: Why should investors consider broad market index funds?

Value mutual funds known for their inherent value

Value funds typically focus on companies operating in mature industries or experiencing periods of sluggish growth. These companies may not attract growth investors’ interest at the moment, yet value investors see them as having the potential to deliver robust returns over extended periods. Some of the best value funds that have indeed added value to investors’ portfolios are illustrated in the table below

Name of the fund

5-year returns (in %)

10-year returns (in %)

JM Value Fund

27.67

20.28

HSBC Value Fund

25.51

19.86

Bandhan Sterling Value Fund

25.36

18.56

Nippon India Value Fund

24.66

18.08

Tata Equity PE Fund

22.65

17.84

Source: AMFI (As of July 05, 2024)

Why choose value-oriented mutual funds?

Investors seeking diversification in their investment portfolios often choose value funds because these funds invest in a collection of value stocks, thereby spreading out risk. This approach contrasts with selecting individual stocks, where the performance of a single company can have a substantial impact on your entire investment.

Value-oriented mutual funds can provide several advantages to investors, such as:

  • Potential for increased returns: Value stocks have the potential to exceed market performance as their true value becomes more widely recognized by investors.
  • Reduced volatility: Value stocks generally exhibit lower volatility compared to growth stocks, making them attractive to risk-averse investors.

Also Read | These seven value mutual funds beat benchmark index in past 10 years

Beware of the risks involved

Nevertheless, every investment, particularly in the stock market, carries its inherent risks. Similarly, value investing is not exempt from these risks. Some of the risks associated with value-oriented mutual funds include:

  • Value traps: Occasionally, stocks that seem undervalued may turn out to be worth less than their market price suggests.
  • Market downturns: Value stocks can be more vulnerable to market downturns compared to growth stocks.
  • Long-term investment horizon: Value investing necessitates a long-term perspective, as it often requires time for value stocks to realize their full potential.

Before investing in a value-oriented mutual fund, it’s crucial to conduct thorough research and grasp the associated risks. Additionally, take into account your investment objectives and risk tolerance prior to making any investment decisions.

 

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First Published:8 Jul 2024, 11:00 AM IST
HomeMutual FundsMutual Funds: 5 best value-oriented funds gave over 27% return in past five years

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