A bunch of new categories have been created by SEBI in order to make investing simple for retail customers

The value fund category is one of them.

The system that SEBI has now evolved has 36 categories of mutual funds.

The basic idea of categories is that one can divide funds into different buckets, based on investment usage and characteristics.

5 Best Value Category Funds for 2018

1. Aditya Birla Sun Life Pure Value 

This five-star fund has beaten its benchmark by a large margin over the years. It is a high-risk fund but has given a return of 18.71% since its launch.

Returns per annum of Aditya Birla Sun Life Pure Value:

Duration Returns
1 year 3.0%
3 years 13.7%
5 years 29.4%
Since launch 23.81%

Key Information 

Launch Date 01 January 2013
NAV (26 July 2018) ₹59.1
Plan Type Direct
Rating by Groww 5 Star
AUM (Fund Size) ₹1,456 Cr
Riskometer High
Minimum SIP ₹500
Minimum SWP ₹500
Performance w.r.t its Benchmark Has not consistently outperformed its benchmark S&P BSE Enhanced Value TRI since its launch. Last 1Y returns is below benchmark.
Age of the fund 5 years old
Expense Ratio 1.03%
Exit Load If redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Investment Objective The scheme seeks to generate consistent long-term capital appreciation by investing predominantly in equity and equity related securities by following value investing strategy i.e buying into stocks that are trading for less than their intrinsic value – stocks that the market is undervaluing.

2. IDFC Sterling Value Fund

It is a fund with high risk and has given a return of 18.28% since its launch.

Returns per annum of IDFC Sterling Value Fund

Duration Returns
1 year 8.0%
3 years 14.9%
5 years 24%
Since launch 18.28%

Key Information

Launch Date 01 January 2013
NAV (26 July 2018) ₹56.7
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹2,916 Cr
Riskometer Moderately High
Minimum SIP ₹1,000
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark S&P BSE 500 TRI since its launch.
Age of the fund 5 years old
Expense Ratio 1.24%
Exit Load If redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Investment Objective The investment objective of the Scheme is to seek to generate capital appreciation from a diversified portfolio of equity and equity related instruments.

3. HDFC Capital Builder Value Fund

This value fund is high demand in the market right now, because of its performance in recent months.

It is a fund with moderately high risk and has given a return of 25.87% since its launch.

Returns per annum of HDFC Capital Builder Value Fund:

Duration Returns
1 year 12.1%
3 years 14.6%
5 years 22.2%
Since launch 18.97%

Key Information 

Launch Date 01 January 2013
NAV (26 July 2018) ₹309.6
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹2,310 Cr
Riskometer Moderately High
Minimum SIP ₹500
Minimum SWP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark NIFTY 500 TRI since its launch.
Age of the fund 5 years old
Expense Ratio 0.84%
Exit Load If redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Investment Objective The fund plans to achieve capital appreciation in fixed period of time by investing predominantly in equity oriented securities

4. L&T India Value Fund

This is one of the most popular funds in the value category.

It is a fund with high risk and has given a return of 22.20% since its launch.

Returns per annum of L&T India Value Fund

Duration Returns
1 year 2.3%
3 years 13.9%
5 years 26.6%
Since launch 22.20%

Key Information 

Launch Date 01 January 2013
NAV (26 July 2018) ₹37.8
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹7,648 Cr
Riskometer High
Minimum SIP ₹1,000
Minimum SWP ₹500
Performance w.r.t its Benchmark Has not consistently outperformed its benchmark S&P BSE 200 TRI since its launch. Last 1Y returns is below benchmark.
Age of the fund 5 years old
Expense Ratio 1.34%
Exit Load If redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Investment Objective The investment objective of the Scheme is to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity related securities, in the Indian markets with higher focus on under valued securities. The Scheme could also additionally invest in Foreign Securities in international markets.

5. Reliance Value Fund – Direct

This fund also has a  high risk and has given a return of 15% since its launch.

Returns per annum of Reliance Value Fund – Direct

Duration Returns
1 year 7.6%
3 years 10.1%
5 years 20.8%
Since launch 15%

Key Information

Launch Date 01 January 2013
NAV (26 July 2018) ₹75.3
Plan Type Direct
Rating by Groww 3 Star
AUM (Fund Size) ₹3,154 Cr
Riskometer High
Minimum SIP ₹500
Minimum SWP ₹100
Performance w.r.t its Benchmark Has consistently outperformed its benchmark S&P BSE Enhanced Value TRI since its launch.
Age of the fund 5 years old
Expense Ratio 1.58%
Exit Load If redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Investment Objective The primary investment objective is to seek capital appreciation and or consistent returns by actively investing in equity and equity related securities.

What is the value fund category?

A value fund is a fund that follows a value investing strategy and seeks to invest in stocks that are deemed to be undervalued.

The focus is on identifying stocks that are currently priced at a discount, or at a price that is not reflective of their true worth.

By buying a stock at a high margin of safety, the risk is mitigated to some extent.

Value investing is often compared with growth investing, which focuses on emerging companies with high growth prospects.

For example, a fund family may include small, mid and large cap value funds for investors to choose from.

Key Details

Scheme type Equity scheme
Definition An equity mutual fund following a value investment strategy
Asset allocation Minimum investment in equity & equity related instruments is 65% of total assets

Investment style of value funds

Both growth and value are two fundamental approaches to stock investing that fund managers follow.

Growth investing entails looking for companies that have a potential to grow faster than others. The optimism is reflected in the premium valuation commanded by the market price of such companies.

A value investor, on the other hand, buys undervalued stocks that have a potential for appreciation, but are usually ignored by the investing community.

The premise of value investing is that the market has some inherent inefficiencies, causing specific companies to trade at levels below what they are actually worth for.

Value fund managers are skilled in identifying these market inefficiencies.

In theory, once the market corrects these inefficiencies, the value investor will gain from an increase in the share price.

Often, value stocks are associated with dividend payments since they are usually well-established companies with committed dividend distribution programs.

There are only a handful of equity funds in the market which uses the value investment strategy.

Hnece, the best way to invest in this category of mutual funds is to have a long-term investment horizon of at least 5 years.

Challenges of value investing 

The biggest challenge of value investing is estimating the fair value. Estimating the fair value of an underpriced stock is both an art and science.

To determine fair value, fund managers estimate future cash flows of the company, which is usually a difficult task for undervalued companies, because their past performance will not give you the true picture and the fund managers need to make a judgement about future growth.

Though value investing can potentially give superior long-term returns, it is more difficult than growth investing.

Only very experienced fund managers, with a long track record of out-performance, are likely to be successful value investors.

So, it is upto you to decide now, do you choose growth or do you choose value?

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww