The best value funds to invest in August 2024

The theme of value has dominated the Indian stock market for the last one year or so. mutual funds who have been following the value investing The value investing strategy has offered good returns over the last one year. However, fund houses that had followed the growth strategy have suffered. If you blindly trust the principles of value investing, you can invest in value funds To take care of your long-term needs.

If you are new to value investing, you should familiarize yourself with this style of investing and its advantages and disadvantages. A value investor tries to pick stocks that are available at cheaper valuations. These investors employ various ratios and methodologies to identify such stocks. Basically, they look for stocks that are available at a discount to their true or intrinsic value. Simply put, it means that the market has not discovered the true potential of these stocks and they are available at a discount.

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Value investors buy such stocks and wait for the market to discover them. When discovery occurs, stock prices rise and value investors make money. It may sound simple, but it is not very easy to execute. The market may take a long time to discover these stocks and may test your patience. The discovery may never happen. That is why value mutual funds are recommended only for sophisticated investors.

The past few years had not been very good for value investing fans, as a few heavyweight stocks were driving the market. Value fund managers and investors complained that no one was paying attention to valuations. Everyone was willing to pay a premium to own the few stocks that were driving the market, they said. The trend reversed in 2021. The market was on the upswing, and the rally was not driven by a handful of stocks. Most stocks participated in the rally – a broad-based rally eventually took place. Thanks to the rally, value funds also managed to make a comeback. However, the lean times taught investors some important principles of value investing.

When following the principles of value investing, there may be periods when stocks do not perform sufficiently in the market. All one needs to do at such a time is to stick to the strategy and wait patiently. However, in recent years investors have learned that it is not easy to stick to it. Many investors have lost patience and sold their investments. That is why it is prudent to limit investments in value funds. According to mutual fund managers, investors should invest a maximum of 20% in value funds. They should also remember that the market does not always pay a premium for value stocks. When the market takes little account of valuations, value funds will not perform sufficiently. If one cannot wait patiently, one should not invest in value funds.Read also | NPS plans outperformed over 200 mutual funds in the last one year. Should you switch sides?

If value investing still appeals to you, here is our list of recommended value funds to invest in August 2024. There is no change in our recommended schemes. Stay tuned for our monthly updates to know if your favourite scheme is performing well.

Best Value Mutual Funds to Invest in August 2024:

Our methodology:
ETMutualFunds.com has used the following parameters to select the equity mutual fund schemes.
1. Moving average returns: Filmed daily for the past three years.

2. Consistency over the last three years: The Hurst exponent, H, is used to calculate the consistency of a fund. The exponent H is a measure of the randomness of a fund’s NAV series. Funds with a high H tend to exhibit low volatility compared to funds with a low H.

i) When H = 0.5, the return series is said to be a geometric Brownian time series. This type of time series is difficult to forecast.

ii) When H < 0.5, the series is said to have mean reversion.

iii) When H > 0.5, the series is said to be persistent. The higher the value of H, the stronger the trend of the series.

3. Downside risk: For this measure we have only considered the negative returns contributed by the mutual fund.

X = Returns below zero

Y = Sum of all squares of X

Z = Y/number of days needed to calculate the relationship

Downside risk = square root of Z

4. Superior performance: It is measured by Jensen’s Alpha for the past three years. Jensen’s Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). A higher Alpha indicates that the portfolio’s performance has outperformed the returns predicted by the market.

Average returns generated by the MF Plan =

[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}[Tasalibrederiesgo+BetadelesquemaMF*{(Rendimientopromediodelíndice-Tasalibrederiesgo}[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}

5. Asset size: For equity funds, the asset size limit is Rs 50 crore.

(Disclaimer: Past performance is no guarantee of future performance.)