scorecardresearchWith 19.85% returns in 3 years, IDFC Sterling Value Fund tops the “Value

With 19.85% returns in 3 years, IDFC Sterling Value Fund tops the “Value Fund” category

Updated: 24 May 2022, 02:27 PM IST

If you prefer value over growth, then investing in value funds may be the right kind of fund for you.

Investing in value funds for a long period

Investing in value funds for a long period

Not all stocks may perform as per your expectations. This is because the market sometimes fails to respond to valuations and gives in to the investors’ euphoria and expectations regarding certain stocks irrespective of the quality of their fundamentals. However, if you are someone willing to wait for certain stocks to perform as per their valuation levels, parking money in value funds may be the best investment option for you. However, you must wait for many years before you see your fund performing as per your expectations. A comparison of value funds based on their experience ranging from one to five years underscores how IDFC Sterling Value Fund - Direct Plan-Growth has outperformed its peers.

Only those with a good understanding of macro trends and the willingness to take selective bets for higher returns compared to equity funds must park their earnings in these kinds of funds.

As per the guidelines stipulated by the Securities and Exchange Board of India (SEBI), investments in this fund come under the “Very High Risk” category.

IDFC Sterling Value Fund - Direct Plan-Growth

Launched on January 01, 2013, the current assets under management (AUM) amount to 4,635.91 crores as of March 31, 2022. The risk factor is too high as the focus is on value investing than growth investing. This means that the fund may not earn returns in sync with the bull run in the market as this fund invests in stocks of emerging companies with high growth prospects, thus, necessitating more time than their established counterparts listed in the market. This medium-sized mutual fund charges a 0.85 per cent expense ratio.

The fund is benchmarked against the Nifty 500 Value 50 Total Return Index and can be bought to earn returns in the long run. Considering the low expense ratio charged by this fund, the returns from this long-duration fund are a bit higher compared to other funds in this category.

The minimum amount you can invest in this fund is 5000 in a lump sum while you can make an added minimum investment of 1000 in a lump sum in this fund. The minimum investment you can make through SIPs is 100.

The fund comes with an exit load. Investors who opt to redeem more than 10 per cent of the units invested in the fund must pay an exit load of one per cent. However, there is no exit load if the fund is redeemed after a year.

Fund performance

Many investors inquire why they must invest in this fund more than any other. A comparative analysis of most income funds in this category underscores the exceptionally high returns that investors have earned by investing in it.

Scheme Name3-year Returns5-year Returns
IDFC Sterling Value Fund - Direct Plan-Growth19.85%13.97%
ICICI Prudential Value Discovery Fund - Direct Plan-Growth20.20%13.71%
Nippon India Value Fund - Direct Plan-Growth15.89%12.75%
UTI Value Opportunities Fund - Direct Plan-Growth15.73%12.72%
Templeton India Value Fund - Direct-Growth16.54%11.22%

Staying invested for a prolonged period yields returns that beat inflation and enable you to create the desired corpus. This you can achieve by investing in this fund through systematic investment plans over a period ranging from 10 to 15 years.

Asset allocation

This open-ended value-oriented equity scheme invests 94.1 per cent of its capital in Indian stocks of which 31.07 per cent of the investments are in large-cap stocks, 14.64 per cent in mid-cap stocks with 32.96 per cent being used to buy and sell small-cap stocks. The remaining portion of the fund is invested in debts, cash and cash equivalents. Of the remaining amount, 0.05 per cent of the money is parked in debts while 5.81 per cent is invested in cash and cash equivalents.

The returns factor

The scheme earns around 17.75 per cent returns in a year while the absolute returns over five years are 92.32 per cent. Since its inception, investors have earned 16.39 per cent returns on a yearly basis and 315.84 per cent returns in absolute terms.

Tax treatment

If the fund units are sold within a year of being bought, a short-term capital gains tax of 15 per cent would be applicable. However, fund units sold after a year from the purchase date attract long-term capital gains tax. The current tax rate is 10 per cent on long-term capital gains exceeding 1 lakh.

Disclaimer: Mutual funds are subject to market risks. Please read the offer document carefully before investing. Also, the Securities and Exchange Board of India has stipulated the latest guidelines categorising this fund under the “Moderate Risk” category.

Benchmarking mutual funds
First Published: 24 May 2022, 02:27 PM IST