How many times have we been advised to focus on the value of a stock than its price? This is because correctly valued stocks are more likely to respond to stock market rallies than those trading at inflated valuations. The market is a strict teacher to those who think that it runs on their whims and fancies. That is why you will find overtly priced stocks crashing down at a much higher speed than those trading at prices near their intrinsic values.
Benefiting from value fund opportunities
If you are investing in the market for a long period, look for value instead of focusing on growth funds alone. Those looking to build a portfolio to achieve long-term goals must consider parking their money in value funds. Also, putting your money in these funds lends you access to quality stocks across all market caps, which means that you do not have to analyse separately the large-cap funds, mid-cap funds or small and micro-cap funds and invest in them accordingly.
Take for example the UTI Value Opportunities Fund. This fund, benchmarked against the NIFTY 500 Total Return Index, has earned 12.10 per cent returns over the past five years, thus, hinting at an impressive growth beyond the current inflation rate.
Although, it is obvious that past returns are not a guarantee for future returns of any mutual fund. It still is an important benchmark while shortlisting your investment products.
More impressive is the fact that the ongoing pandemic that destroyed many businesses and slowed down major economies of the world did not have an impeding effect on this fund’s performance. This has helped its investors earn considerable wealth and create their much-desired corpus.
This moderately high-risk fund came into existence on January 02, 2013. Investors have earned around 199.50 per cent returns since this fund’s inception, which means that ₹10,000 invested in 2013 has grown to ₹29,950.90 to date.
Calculations reveal how a systematic instalment plan (SIP) of ₹5000 started on January 02, 2013, accumulated to ₹9,59,330 at this rate. Since its inception, investors have earned nearly 11.71 per cent returns.
Yielding returns over the period
Clearly, past returns are not a guarantee of future returns. However, they give a valuable insight into the fund and its manager's thinking and philosophy. One cannot just base their investment decision on past returns and in no way investors can expect past performances to continue in the future, but they are an important benchmark in one of the many factors one must look at while deciding on the mutual fund to buy.
Extrapolating the returns for investors interested in putting their money regularly for 10 years or more, we see the kind of returns that long-term investors may earn. For the purpose of calculation, let us assume regular monthly investments of ₹5000 over 10 years, 15 years, 20 years, 25 years and 30 years. The returns rate is assumed at 12 per cent.
| Investment tenure | Total amount invested (in Rs) | Estimated returns (in Rs) | The total value of the investment (in Rs) |
| 10 years | 6,00,000 | 5,41,843 | 11,41,843 |
| 15 years | 9,00,000 | 15,53,956 | 24,53,956 |
| 20 years | 12,00,000 | 36,03,686 | 48,03,686 |
| 25 years | 15,00,000 | 75,11,580 | 90,11,580 |
| 30 years | 18,00,000 | 1,47,47,070 | 1,65,47,070 |
The expense ratio of the underlying fund as of now is 1.25 per cent. The portfolio turnover ratio 22 per cent, which is much lower compared to its peers, which implies that the fund manager prefers a long-term approach to investing in stocks and bonds. This guarantees stability compared to the volatility that we see in most other fund movements.
How much can you invest?
Those interested to invest in this fund must put in at least ₹5000 with every application, and in multiples of ₹1000 in further lumpsum purchases. The minimum purchase amount is ₹500 for those who wish to invest through SIPs. Thereafter, the investors can invest in multiples of ₹100 subject to a minimum number of 12 instalments.
Returns comparison of several value funds highlight the following
| Name of the fund | Two-year returns | Three-year returns | Five-year returns |
| ICICI Prudential Value Discovery Fund | 32.53% | 17.79% | 13.02% |
| Nippon India Value Fund | 31.08% | 14.31% | 12.10% |
| IDFC Sterling Value Fund | 46.55% | 17.93% | 11.90% |
| DSP Flexi Cap Fund | 21.90% | 13.01% | 11.57% |
Asset allocation
There are 64 stocks in this fund of which 52.23 per cent are in the large-cap category, 14.34 per cent is in the mid-cap category with the remaining small-cap investments occupying only 12.22 per cent of the fund. Apart, the fund has 0.17 per cent investment in debt of which 0.17 per cent in government securities.
There is an exit load of up to one per cent against redemption made within a year. The idea behind parking money in this fund is to avail from investing majorly in a well-diversified assortment of stocks of fundamentally strong companies.
Note: This article is for information purposes only. Please speak to your SEBI-registered financial advisor before making any financial or investment decision.
