Value Funds: Invest in Undervalued Stocks Online

What is a Value Fund?

A Value Fund is an equity mutual fund which follows the value principle of investing. The fund invests primarily in stocks of companies which are undervalued but which have string fundamentals. As such, when the companies grow, you can earn attractive returns on investment.

Advantages of Value Funds

Long-term growth potential

As undervalued companies reach their potential over time, your investments can yield attractive returns.

Portfolio diversification

Your portfolio comprises good quality stocks at low prices and is diversified across sectors with professional fund management.

Lower volatility risk

Since Value Funds invest in undervalued stocks, their prices dont fall considerably even when the market declines. As such, volatility risks are comparatively lower.

Margin of Safety

Investing in undervalued stocks provides a potential "margin of safety," as these stocks are often less likely to experience significant price declines compared to overvalued ones.

Value Funds Returns Calculator

REGULAR INVESTMENT

SIP

Invest systematically in regular amounts and build a corpus with a disciplined investing habit.

ONE TIME INVESTMENT

Lump sum

Invest once with the facility of lump sum investing and save at your will. Time the market correctly and earn good returns.

INVEST AMOUNT

PERIOD

RETURNS

Total Amount Invested

₹ 0

after 30 years you will get a return of

₹ 0

Disclaimer: Projections/estimations is backtested using historical data.

TARGETED RETURN VALUE

INVESTMENT PERIOD

RETURNS

Total Amount Invested

₹ 0

after 30 years you will get a return of

₹ 0

Disclaimer: Projections/estimations is backtested using historical data.

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Understanding Value Funds

Table of Contents

What are Value Funds?What are the features of Value Funds?Who should invest in Value Funds?What should be the investment horizon for Value Funds?What is the tax implication of Value Funds?What are the payout options?

What are Value Funds?

A type of equity mutual fund , Value Funds are those which invest at least 65% of their portfolio in stocks and securities of companies which are undervalued but which have a good potential. Such companies are fundamentally strong which are currently out of favour with investors but which have the potential to deliver long-term returns.

What are the features of Value Funds?

Diversified portfolio of undervalued securities across sectors
The portfolio allocation is not regulated allowing fund managers allocation flexibility
Suitable for investors with a long-term investment horizon of 7+ years
Invest through SIPs or lump sum
Earn tax-free returns up to ₹1 lakh if you stay invested

Who should invest in Value Funds?

Seasoned investors who don’t mind placing bets on undervalued companies

Investors who are aware of macro trends and can check the fundamentals of a company

Investors who are patient with the principle of value investing

Long-term investors who don’t have immediate financial obligations

What should be the investment horizon for Value Funds?

Value Funds consist of stocks which are undervalued
Such stocks take time to get noticed and raise their valuation
As such, short-term investment is not recommended as the return potential is limited
Value Funds are suitable if you have an investment tenure of 7+ years
A long-term horizon also helps earn attractive investment returns
You also get a tax benefit on staying invested for a longer tenure

What is the tax implication of Value Funds?

Returns up to ₹1 lakh are tax-free if you stay invested for 12 or more months
Returns exceeding ₹1 lakh are taxed at 10%
For redemption within 12 months, returns are taxed at 15%
Dividends earned, if any, are taxed at your income tax slab rate

What are the payout options?

Dividend option

Earn dividends on your investment at regular intervals
Growth option

Accumulate the returns over the investment tenure and get a lump sum amount on redemption

FAQs On Value Funds

The core of value investing lies in ‘buying when cheap, selling when expensive’. Value investors pick stocks trading at lower than their intrinsic value, and buy them with the expectation to sell them and earn profits in the long-term.

The intrinsic value of a stock (often called the real value) is essentially the anticipated value that takes long-term growth and not just current market value into consideration. Its calculation is based on fundamental analysis.

Value stocks are individual equities that are undervalued in the market with regard to intrinsic value, while Value Funds are mutual funds that diversify and invest in a portfolio of value stocks.

Before investing in Value Funds, you must consider the fund’s expense ratio and historical performance, the fund manager’s track record and investment strategy, and your own risk tolerance.

No, Value Funds are not risk-free. They carry stock specific risks as well as market risks (owing to the market being unpredictable at all times).

There is no lock-in period for Value Funds, you can redeem them as per your choice. However, try to align this decision with your long-term financial goals, market conditions, and other factors such as the exit load of the fund.