Best Value Mutual Funds

Value funds invest in stocks that are deemed to be undervalued in prices based on fundamental characteristics. They are open-ended equity schemes that follow a value investment strategy. This kind of fund invests in the shares of companies that are traded at discounted rates, and the primary reason for investors to choose these stocks is that they could be undervalued due to temporary factors but can give high returns in the long run. 

It is essential to note that value funds are often misunderstood to be contra funds. Contra funds aim at identifying stocks that are temporarily out of favour, whereas value funds concentrate on stocks trading below their intrinsic value. You can have a look at some of the best value funds in the table below.

Value funds are likely to be suitable for-

1. Long Term Investors

Fund managers pick these stocks to see them grow over time and in the future, which means you will have to stay invested in the funds for the long term to witness the true growth potential. Therefore, investors with a longer investment horizon can prefer investing in them. 

2. Investors Already Holding Growth Stocks

Value funds can provide solid returns in any market cycle for investors who have high exposure to growth stocks. 

3. Investors with a High-Risk Appetite

These funds’ performance may or may not improve in the future. Investors who are open to both the outcomes and have risk-bearing ability can start investing in value funds.

If you are investing lumpsum in mutual funds and looking forward to estimating your returns, simply use lumpsum calculator. It is a convenient tool that can assist you in generating your prospective returns.

There are certain factors to be considered before making investments in the top value mutual funds, and they are:

1. Past Performance: You will have to look at the past performance of the fund, mostly a period of 5 to 7 years, which is critical with a value fund. It assists in the analysis of how the fund manager has been moving towards the investment objective across the market cycle while following the value investing strategy.
2. Investment Horizon: Before an investor decides to find the best value funds to invest in 2025, it is noteworthy to remember that these funds are best suited for investors who have a long-term investment tenure in mind. They need to stick to their investment horizon. It can help them to get significant returns on the investment. 
3. Expense Ratio: Just like other categories of mutual funds, this kind of fund also has an expense ratio. It is the fee charged for managing your investment. If the fund manager tends to change the portfolio often, it can result in higher transaction costs. Therefore, it is essential for an investor to look at this factor before choosing an investment. 
4. Risk: All mutual fund investments are market-linked and carry some amount of risk. Value funds, too, face risks based on market conditions. It is essential to look into the fund and whether or not the fund manager is managing the asset allocation to benefit from the dynamic market. 

Here are some benefits of investing in the best value mutual funds:

Portfolio diversification: Value funds invest in undervalued stocks across different sectors. It helps in diversifying a portfolio with limited exposure to options with a significant risk-reward ratio. 

Lower downside risk: The downside risk and the level of volatility in the case of value mutual funds is lower when compared with other types of equity funds. Since these stocks are already undervalued, they are less impacted in a bearish market. 

High-growth potential: Value funds have the potential to multiply investors’ wealth significantly and maximise portfolio value over the long term. 

Investment route: Investors can allocate their savings to mutual funds via two modes, namely lump sum and systematic investment plan (SIP). The first route allows individuals to invest the entire amount in one go. By opting for the SIP mode, they can invest in a value fund via fixed instalments at regular intervals (monthly, quarterly, yearly, etc.). While individuals need to invest at least Rs.1,000 if they opt for the lump sum route, they can start a SIP with Rs.100. Note that this minimum amount may vary from one scheme to another.

The risks to consider while selecting the best value mutual funds for 2025 are-

1. Holding Periods: For value investing strategies, the stock price discovery can take longer than estimated. The fund manager chooses low-price stocks, and they can turn around in several years. At the same time, some stocks can multiply faster in the short term. 
2. Underperformance: At times, value stocks do not perform based on the estimations, which can further take a hit on your investment portfolio.