InvestorQ : What are the Value funds & good to invest?
Purvesh made post

What are the Value funds & good to invest?

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simran Kaur answered.
2 months ago

A value fund is a mutual fund that follows the principles of value investing. They invest in shares of companies that are trading at a considerable discount to its intrinsic valuation. Value investing is often compared with growth investing, which focuses on emerging companies with high growth prospects. By holding these stocks for the long-term, the fund managers expect to earn handsome returns from these stocks when their value is realized by the market.

The true hallmark of value investing is in preparing for the next up-cycle by waiting patiently for an investment opportunity and capitalizing on it in a thoughtful manner as and when it arrives. Value funds are typically used as allocations for long-term investments that can grow continuously over time. Ideally, an investor who wants to invest in these funds should stay invested for a longer duration. Value equity funds have the potential to offer a better risk-reward proposition among mutual funds.

A general rule of thumb is that value funds should consist of 10% of an investor’s overall portfolio holdings. The reason being that their downside tends to be capped, which helps an investor's overall portfolio returns.