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What Are Value Funds?

Value funds are open-ended equity-linked schemes that focus on investing primarily in undervalued companies with the potential to grow in the long term. For example, the fund manager will consider a stock to invest in trading at a discount, i.e., its intrinsic value is higher than the market price. View More

These types of stocks have the potential to make the maximum profit for their investors, and this type of investment approach is called a value investing strategy. These stocks can provide excellent returns in the future and are ideal for gaining promising returns in the long run.

Value stocks are often renowned companies in their industry, linked with the NIFTY Value Index or similar Indexes. Most companies in the value fund often provide regular dividend payments to their investors, making them an excellent investment option for those new to investment and who want steady returns in the long term.

Who Should Invest in Value Funds?

Value investing is one of the most popular strategies, but investors should also remember that these come with inherent risks. The investments of a value fund could represent a business or undervalued assets across large-cap, mid-cap, and small-cap companies without being for any particular View More

industry or segment. Thus, value funds are the ideal investment option for:

Investors with an aggressive investment goal who want to generate high returns
Those looking for long-term investments that can grow steadily without any expected returns
Investors who have a higher risk appetite
Investors who can be patient with their investment and can digest losses when the market performance fluctuation or in the negative

Features of Value Funds

The key features of value mutual funds include: View More

Asset Allocation: As per Securities and Exchange Board of India (SEBI) guidelines, a fund has to allocate at least 65% of its investment holding to equity and equity-linked stocks to be categorized as a value mutual fund
Risk-Reward Ratio: Since the primary investment is in equity and equity-linked holdings, the performance of the fund can be impacted due to market conditions. It makes it volatile and has a high-risk rating. Those investing in value funds must understand they cannot promise guaranteed returns and should be ready to take a risk when investing in this fund.

Taxability of Value Funds

Value funds have to invest at least 65% of their net assets in equities and equity-linked schemes, which makes them taxable under the equity-oriented mutual fund’s tax laws. The tax is applicable when the investor exits or redeems their investment and is categorized under the capital gains tax.

For a holding period of less than a year, the investor has to pay a Short Term Capital Tax (STCG) or 15%, while for a holding period of more than 12 months, the Long Term Capital Gains Tax (LTCG) is applicable, at a rate of 10%. An exemption of Rs. 1 lakh per year applies to LTCG.

In addition to the capital gains tax, the investor must also pay tax on any dividend income generated from their investments in the value fund. The fund house will deduct a 10% Dividend Distribution Tax (DDT) when paying out the dividend to the investors.

Risk Involved With Value Funds

Similar to other equity-linked mutual funds, value funds carry a high-risk rating. The NAV of a value fund can fluctuate due to market conditions. However, since the fund manager has the View More

flexibility to choose opportunities across capitalization and industry, the risk is relatively low.
Value funds invest in some of the top companies with a strong fundamental and a chance to generate a higher return for investors. In most cases, these are stable companies with high growth potential in the long term. It makes the inherent risk comparatively lower as the company’s market value is already at a discounted rate, and there is a good chance of it growing steadily.
Tax on value funds is the same as on equity funds and may come with costs like exit load, entry load, expense ratio, and others attached depending on the fund house. These costs should be considered when determining the expected returns from this investment.

Advantages of Value Mutual Funds

Value funds are an excellent investment option for those most investors, and despite the inherent risks, they have several advantages that make them ideal for your portfolio. Some of the benefits of value funds include:

Diversification of portfolio: Value funds allow investors to get exposure to a wide range of investment options, be it from any market capitalization, segment or industry. It helps investors to diversify their portfolios.
Ability to generate a higher return in long-term: The value investment approach focuses on identifying undervalued stocks with a chance for high returns. Since these stocks are already at a discounted price, they are less vulnerable to market fluctuations.
Strong fundamental stocks: The investments picked by value funds have good fundamentals, which increases the chances of generating a higher return. Thus, it is ideal for most investors who want to gain steady returns in the long term.
Higher Flexibility: The fund manager does not have to abide by any allocation requirement and can therefore gain the flexibility to pick and choose the right assets depending on their market analysis.
Ideal for beginners and new investors: Those new to the market and who do not have much financial knowledge of market performance can benefit from investing in value funds as the investment expands a range of financial investment options.
Flexible investment options: Value funds offer investors the ability to invest in direct or regular plans, depending on the individual’s preference. Also, investors can benefit from both Systematic Investment Plan (SIP), which allows a standard monthly investment while allowing a lumpsum investment option.

Who Are These Funds Suited For?

Value investing strategy requires a solid financial understanding, analytical skills, and understanding of the market condition – in the present and the future. It can be overwhelming for most individuals, so value funds are ideal for investors to benefit from this investment approach. Value funds are managed by highly qualified fund managers with a team of experts, financial View More

analysts, and other resources that check the financial market for any ups and downs. It makes value funds an ideal investment option for choice with:

Long-term investment goal: Investors who can be patient with their investment and stay invested for at least 5-7 years. The longer one stays invested in value funds, the higher the chances of generating a good return.
High-Risk Appetite: Value funds invest primarily in equity and equity-linked assets, which are volatile as per the market conditions. Thus, the fund has a high-risk rating, and investors need to asses their risk profile before investing in top-value mutual funds.
When considering the best value mutual funds in 2022, investors should look at some of the key factors like:

Expense ratio: The amount the asset management company (AMC) charges to investors to cover its operational and administrative expenses. A low expense ratio is ideal when comparing schemes.
Fund manager Experience: Since the fund manager will call the shots with the best value mutual funds, investors should look at the fund manager’s knowledge and market understanding. They can track the fund manager’s records and make an informed investment.
Past performance of the fund: Although this should not be considered a factor that will promise similar or higher returns in the future, past returns are an excellent way to understand how good the fund manager has been. Checking the fund’s past returns and performance helps investors get a fair idea.
Asset allocation: Investors should also look into the fund’s present asset allocation, as this will give a good idea of the kind of stocks the fund is banking on. If these sectors or market segments can promise a good return in the future, it is a good value fund to consider.

Popular Value Funds

  • Fund Name
  • Min SIP Investment Amt
  • AUM (Cr.)
  • 3Y Return

Bandhan Sterling Value Fund – Direct Growth is an Value scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Manish Gunwani. With an impressive AUM of ₹6,649 Crores, this scheme's latest NAV is ₹124.169 as of 27-09-23.

Bandhan Sterling Value Fund – Direct Growth scheme has delivered a return performance of 26.4% in the last 1 year, 38.4% in the last 3 years, and an 17.4% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in Value funds.

  • Min SIP Investment Amt
  • ₹1,000
  • AUM (Cr.)
  • ₹6,649
  • 3Y Return
  • 26.4%

Nippon India Value Fund – Direct Growth is an Value scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Meenakshi Dawar. With an impressive AUM of ₹5,574 Crores, this scheme's latest NAV is ₹164.3567 as of 27-09-23.

Nippon India Value Fund – Direct Growth scheme has delivered a return performance of 25.1% in the last 1 year, 30.1% in the last 3 years, and an 15.5% since its launch. With a minimum SIP investment of just ₹500, this scheme offers a great investment opportunity for those looking to invest in Value funds.

  • Min SIP Investment Amt
  • ₹500
  • AUM (Cr.)
  • ₹5,574
  • 3Y Return
  • 25.1%

ICICI Pru Value Discovery Fund – Direct Growth is an Value scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Sankaran Naren. With an impressive AUM of ₹32,753 Crores, this scheme's latest NAV is ₹356.14 as of 27-09-23.

ICICI Pru Value Discovery Fund – Direct Growth scheme has delivered a return performance of 29.7% in the last 1 year, 32% in the last 3 years, and an 18.4% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in Value funds.

  • Min SIP Investment Amt
  • ₹1,000
  • AUM (Cr.)
  • ₹32,753
  • 3Y Return
  • 29.7%

UTI-Value Opportunities Fund – Direct Growth is an Value scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Vetri Subramaniam. With an impressive AUM of ₹7,539 Crores, this scheme's latest NAV is ₹127.1453 as of 27-09-23.

UTI-Value Opportunities Fund – Direct Growth scheme has delivered a return performance of 19.2% in the last 1 year, 25.2% in the last 3 years, and an 13.6% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Value funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹7,539
  • 3Y Return
  • 19.2%

Templeton India Value Fund – Direct Growth is an Value scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Anand Radhakrishnan. With an impressive AUM of ₹1,266 Crores, this scheme's latest NAV is ₹582.7027 as of 27-09-23.

Templeton India Value Fund – Direct Growth scheme has delivered a return performance of 27.7% in the last 1 year, 38.1% in the last 3 years, and an 15.3% since its launch. With a minimum SIP investment of just ₹5,000, this scheme offers a great investment opportunity for those looking to invest in Value funds.

  • Min SIP Investment Amt
  • ₹5,000
  • AUM (Cr.)
  • ₹1,266
  • 3Y Return
  • 27.7%

Union Value Discovery Fund – Direct Growth is an Value scheme that was launched on 05-12-18 and is currently under the management of our experienced fund manager Sanjay Bembalkar. With an impressive AUM of ₹174 Crores, this scheme's latest NAV is ₹21.55 as of 27-09-23.

Union Value Discovery Fund – Direct Growth scheme has delivered a return performance of 24.6% in the last 1 year, 27.2% in the last 3 years, and an 17.2% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in Value funds.

  • Min SIP Investment Amt
  • ₹1,000
  • AUM (Cr.)
  • ₹174
  • 3Y Return
  • 24.6%

JM Value Fund – Direct Growth is an Value scheme that was launched on 02-01-13 and is currently under the management of our experienced fund manager Gurvinder Singh Wasan. With an impressive AUM of ₹223 Crores, this scheme's latest NAV is ₹77.2564 as of 27-09-23.

JM Value Fund – Direct Growth scheme has delivered a return performance of 42.3% in the last 1 year, 34.2% in the last 3 years, and an 16.7% since its launch. With a minimum SIP investment of just ₹1,000, this scheme offers a great investment opportunity for those looking to invest in Value funds.

  • Min SIP Investment Amt
  • ₹1,000
  • AUM (Cr.)
  • ₹223
  • 3Y Return
  • 42.3%

HDFC Capital Builder Value Fund – Direct Growth is an Value scheme that was launched on 01-01-13 and is currently under the management of our experienced fund manager Gopal Agrawal. With an impressive AUM of ₹5,684 Crores, this scheme's latest NAV is ₹564.517 as of 27-09-23.

HDFC Capital Builder Value Fund – Direct Growth scheme has delivered a return performance of 21.1% in the last 1 year, 26.1% in the last 3 years, and an 15.7% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in Value funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹5,684
  • 3Y Return
  • 21.1%

Groww Value Fund – Direct Growth is an Value scheme that was launched on 08-09-15 and is currently under the management of our experienced fund manager Sumit Bhatnagar. With an impressive AUM of ₹10 Crores, this scheme's latest NAV is ₹22.9148 as of 27-09-23.

Groww Value Fund – Direct Growth scheme has delivered a return performance of 19.1% in the last 1 year, 23.8% in the last 3 years, and an 10.8% since its launch. With a minimum SIP investment of just ₹100, this scheme offers a great investment opportunity for those looking to invest in Value funds.

  • Min SIP Investment Amt
  • ₹100
  • AUM (Cr.)
  • ₹10
  • 3Y Return
  • 19.1%

Frequently Asked Questions

What is the ideal investment horizon for Value Funds?

The ideal investment horizon for a value fund is at least 5 years, with the ideal being around 10 years to get the maximum returns while ensuring that the fund can absorb market volatility. The longer one stays invested in the value fund; the higher is the chances of getting a higher return. 

Is there any holding period or lock-in period for Value Funds?

No. Value funds have no lock-in period, and the investors can exit at any time. 

What are the benefits that investors get by using the value investing approach?

Since value mutual funds specialize in picking specific equity stocks at a discount in prevailing market conditions but have great fundamentals to regain their valuation. Most value funds are high-value businesses. They can provide a favorable risk-reward tradeoff and are ideal for investors with an aggressive investment goal. Thus, while these funds are usually volatile in the short term, they promise wholesome returns if one stays invested for longer.

Do value funds have any restrictions in terms of asset allocation?

As per regulations mandated by SEBI guidelines, Value Funds must follow the allocation strategy that follows the value-investment strategy. It means they have to invest a minimum of 65% of their assets in direct equity and equity-linked instruments, while the fund manager has the flexibility to choose from across market capitalization. 

How much returns can one get by investing in value funds?

Although there is no way to determine the returns one can earn in the future, value funds have delivered 12.45% average returns in the last 5 yards, and the last 3 and 10-year annualized returns are 22.68% and 13.52%. 

What is the risk rating for Value Funds?

Value Funds invest at least 65% in equity and equity-linked instruments, making them highly volatile to market conditions. Since these shares are also already on a discounted valuation, the risk is relatively low but still categorized in the high-risk rating.

What is the minimum amount required to invest in a value fund?

The fund’s parent company sets the minimum limit for each mutual fund and will vary accordingly. Generally, the minimum required amount for purchase is around Rs. 1000 and multiples of Rs. 1 after that, while the minimum SIP amount can start from Rs. 500. There is no maximum investment limit. 

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