Basics of Value Funds

Understanding the Basics of Value Fund

There are different types of mutual funds available in the market. You need to have knowledge and understanding of how each mutual fund is different from the other and what are its features. One such fund, which you need to know about, is a value fund.

What is a value fund?

A value fund is a mutual fund that follows a strategy of value investing. It is an open-ended fund and focuses on value investing. The funds invest your money into the stock of companies that are trading at a discount since such stocks offer good investment opportunities.

It is possible to create wealth through value investing. It is a method of purchasing stocks, which are trading at a discounted rate, as compared to its intrinsic value. It is important to remain invested for a long period to earn high profits from the investment.

Why should you invest?

The benefit of investing in a value fund is the ability to generate profits. When you invest in the stocks of companies that have a high growth potential, you have the possibility to generate high profits from the same.

A value fund is less affected by the short-term market dips and has the ability to increase your wealth.

Who should invest?

If you are an investor with a long investment horizon, you should choose to invest in value funds. Additionally, if you are looking for diversification in your portfolio, these funds are the best bet.

Is there any Tax liability?

Since the fund invests into the stocks of different companies, Value fund is categorised as equity fund.

In case of long-term capital gain, there will be a tax of 10% on any amount exceeding INR 1 lakh and in case of short-term capital gain; there will be tax applicable at the rate of 15% in a financial year.

Things to consider while investing

There are certain things you need to keep in mind when investing in value funds; primarily, the fund will not grow overnight. You are investing in value stocks that are trading at a rate lower than its intrinsic value, hence you will have to remain patient and give it time to grow.

In addition, the funds do not invest in high growth stocks; hence, there are chances of under-performance in bull markets. However, these funds do well in both the cycles if you remain invested for a long duration.

How should you select a value fund?

In order to select a fund to invest in, you need to compare the past performance of the fund. Value funds show high results over a long period, hence, compare the performance of a fund over a period of five to ten years, and choose a fund that has consistently performed well.

You can also take a good look at the expected results of the fund to make the right investment decision. Choose a fund that fits your investment criteria and has the right balance between risk and return.

What are the best Value funds?

We have listed down few of the best value funds that you can think about investing. For more details, set-up your account and talk to our financial advisor today:

Common mutual funds investment mistakes

To ensure the investments you make help you toward a financially secure future, you must avoid certain investment mistakes that a lot of newcomers end up making. Mistakes such as:

No Proper Research:

A lot of investors start investing without properly understanding the product or schemes. They do too little or no research of their own or sometimes just listen to the investment pundits and carry out the investments. Once you have your financial goal, the next step is to start identifying an investing plan or scheme that will help you achieve that goal. If you are new to the world of Mutual funds, take advice from professionals, acquire knowledge and start slowly.

Investing in too many Schemes:

If you are just out or an avid investor, investing in too many schemes at the same time is always considered too risky. A lot of people forget that each fund scheme has a diversified portfolio and that if they invest in too many MF schemes, it will become difficult to keep track of them. The best method is to select 2 or 3 MF schemes and build that investment over a period as per your financial goals.

To read the entire list of common mistakes that you should avoid, check out 10 mistakes to avoid while investing in mutual funds.

Why FundsInn?

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FundsInn is AMFI certified company that offers various services including Financial planning and Assets management. We recommend a personalised investment portfolio keeping your financial goals and investments in mind.

Our financial advisors understand your current financial status and suggest a financial plan that suits your needs. You can initiate different types of transactions including Lump sum investment, SIPs (Systematic Investment Plans), in various schemes available on our portal.

If you are looking for guidance then get in touch with our financial advisor and get started today.

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