Value investing has been a dominant theme in the Indian stock market over the last year, with value-focused mutual funds offering strong returns. This strategy contrasts with growth investing, which has seen less success recently. If you believe in the principles of value investing, 2024 could be a favorable time to consider value funds for long-term investment.
What is Value Investing?
Value investing revolves around identifying stocks that are priced lower than their intrinsic or real value. Investors use various ratios and methodologies to spot such stocks, which the market has not yet fully recognized for their potential. The key idea is to buy these undervalued stocks and wait for the market to realize their true worth, causing the stock price to rise, resulting in profits for the investor.
However, value investing is not without its challenges. The market may take a long time to recognize the potential of these stocks, requiring significant patience from investors. Moreover, there are instances when the market may never “discover” these undervalued stocks, leading to underperformance.
Performance of Value Investing in Recent Years
Over the last few years, the performance of value funds has been mixed. The dominance of a few heavyweight stocks in the market led to underperformance for value fund managers, who struggled to convince the market to consider stock valuations. However, in 2021, there was a broad-based market rally, helping value funds make a strong comeback as more stocks participated in the rally.
This comeback reminded investors of key value-investing principles: While the strategy may underperform at times, staying patient and sticking to the strategy is crucial for long-term success. Despite the ups and downs, value investing remains a sound approach, but it requires discipline and patience.
Considerations Before Investing in Value Funds
If you are new to value investing, it’s important to understand that these funds can underperform during periods when the market disregards valuations. As a result, investors must be prepared to wait for the market to recognize the value of their investments. For those with limited patience, value funds might not be the right fit.
Experts recommend limiting your investment in value funds to no more than 20% of your portfolio. This balance ensures that you can benefit from value investing while also maintaining other types of investments in your portfolio to manage risks.
Best Value Mutual Funds to Invest in November 2024
Based on current market conditions, here is a list of recommended value funds to consider for investment in November 2024:
Invesco India Contra Fund
Known for its contrarian approach, the fund focuses on undervalued stocks and has consistently delivered strong performance.
Bandhan Sterling Value Fund
This fund seeks to invest in undervalued stocks with a solid potential for long-term growth.
Nippon India Value Fund
A well-diversified fund that has performed well in identifying undervalued stocks across sectors.
ICICI Prudential Value Discovery Fund
With a long track record of identifying quality undervalued stocks, this fund has delivered impressive returns over the years.
Conclusion
Value investing can be an effective strategy for long-term growth, but it comes with risks. It’s essential to invest in value funds with patience, understanding that these funds may face periods of underperformance. For those who are prepared to follow the strategy, the above-mentioned funds offer some of the best options to consider in November 2024. As always, monitor the performance of these funds and stay updated on any changes to ensure your investment strategy remains sound.
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