List of Best Value Mutual Funds to Consider in 2023
If you’re an investor who has been analysing the markets, you would have noticed that it’s becoming increasingly volatile by the day. This has led smart investors to Invest in value mutual funds.
Value mutual funds are a type of equity fund where the fund managers follow a value investing strategy. They focus on stocks that are trading on a discount for temporary reasons and invest in them to generate high long term gains. The stocks of these funds intrinsically have a greater value than the market price at that particular time. Choosing the right value mutual fund can fetch the investors substantial returns and help them maximise their portfolio value.
Top 10 Value Mutual Funds
| Fund Name | Risk | 1 Year Returns | Fund Size |
| ICICI Prudential Value Discovery Fund | Very high | 30.8% | INR 23,035 crores |
| Nippon India Value Fund | Very high | 24% | INR 4,387 crores |
| UTI Value Opportunities Fund | Very high | 17.1% | INR 6,710 crores |
| IDFC Sterling Value Fund | Very high | 39.1% | INR 4,495 crores |
| JM Value Fund | Very high | 19.1% | INR 159 crores |
| L&T India Value Fund | Very high | 24.1% | INR 7,943 crores |
| IDBI Long Term Value Fund | Very high | 20.4% | INR 107 crores |
| Tata Equity PE Fund | Very high | 15% | INR 5,035 crores |
| Templeton India Value Fund | Very high | 24.1% | INR 634 crores |
| Indiabulls Value Fund | Very high | 18.6% | INR 11 crores |
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Who Should Invest In Value Funds?
Investors looking to invest in value stocks can find it intimidating and overwhelming to analyse the market and find out the best value stocks. This is why fund managers use their expertise to put together stocks and curate value funds for people to invest in. As these are a type of equity funds, the risk factor involved is very high, but the returns can be higher too.
Seeking the help of a financial advisor to pick and choose the best value funds will help in maximising returns and improving portfolios. With that being said, these types of funds are generally well-suited for people who have been investing for some time now, and not beginners.
Factors To Consider Before Investing
Investment Goals
The first and foremost thing an investor needs to analyse before even beginning to invest is the investment goals catered to their needs. These goals vary from investor to investor as well, owing to the difference in their financial objectives. With that being said, value mutual funds are for people who want to capitalise on stocks that are temporarily selling at a discount. These generally have a higher intrinsic value and have huge return potential. Investors need to analyse all options carefully and choose the best value fund to invest in.
Risk Appetite
Since value mutual funds invest purely in equity, they are prone to high-risks. This implies that the performance of these funds are volatile and heavily impacted by market conditions. While these funds generate huge returns in bull markets, they can suffer significant losses in the bear market. Value funds are perfect for investors with a high risk appetite and those who are looking to maximise potential returns.
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Expense Ratio
Fund houses impose a fee on investors to handle the administrative expenses and this fee is called the expense ratio. This is usually a small percentage of a scheme’s total assets and varies from one fund to another, but it’s important to analyse before investing when it comes to value funds. While the ratio may seem small at first glance, it might be huge in absolute monetary terms.
It’s also important to understand the difference between direct and regular plans. Direct plans are usually offered to investors directly and don’t involve distributors or brokers. In regular plans, third parties are involved. So, the expense ratio of a direct plan is lesser when compared to that of a regular plan.
Fund Performance
Fund performances in the past always aid the investors in choosing the right funds and investing smartly. Analysing the trajectories according to market conditions gives an idea of whether the funds were able to live up to the objectives. This will further help in gauging how the funds will perform in the future. Comparing the chosen fund performance to other similar funds in the market also maps a better picture.
Taxability
When it comes to taxation, value mutual funds have the tax structure of equity funds. The capital gains earned on redemption of the units within 1 year are considered as Short Term Capital Gains (STCG) and are taxed at 15 per cent. If an investor redeems the held units after a year, the gains are classified as Long Term Capital Gains (LTCG) and are free if the profits fall under ₹ 1 Lakh, but are taxed at 10 per cent if the gains exceed ₹ 1 Lakh.
Advantages Of Value Mutual Funds
Diversification Of Portfolio
Value funds invest in undervalued stocks across various sectors of business. This aids in diversification and improves the investor’s portfolio with a significant risk-reward ratio. Investing long term can guarantee huge returns, as the prices of the stock go back up after a drop for a short span of time.
Relatively Lower Downside Risk
The level of volatility and the risks involved in the case of a bear market are lower when compared to other equity funds where the values significantly drop. Since the stock prices at the time of investing in a value fund are already lower, the fall won’t be as high as others in the market.
Growth Potential
The discounted stocks in a value fund that have a great value don’t stay that way. Temporary reasons cause the prices to fall and the value increases gradually or suddenly over time. This ensures high growth potential and can multiply investors’ wealth significantly.
Final Word
Investing in value funds is always a good idea if you’re a novice in equity investments or otherwise. Carefully analyse all the options at hand and choose the right fund for you without giving into choice fatigue. Mutual funds are subject to market risks, so make sure to read all the scheme related documents carefully.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
