Nine value mutual funds have delivered exceptional performance over the past five years, with HSBC Value Fund leading at 17.97% annualised returns, followed by ICICI Prudential Value Fund at 17.07% and JM Value Fund at 16.13%. The latest addition to this list is NJ Value Fund, launched by NJ Mutual Fund, which follows a value investment strategy with a minimum application amount of ₹500. According to reports from Mint, most of these high-performing direct mutual funds delivered returns of 15-18% per annum during this period. The complete list now includes Aditya Birla Sun Life Value Fund (15.50%), HDFC Value Fund (15.73%), Nippon Value Fund (15.98%), Templeton India Value Fund (15.70%), and the newly launched NJ Value Fund.
Investment returns are often reported as nominal returns - the percentage gains or losses before adjusting for inflation, taxes, or fees. However, these nominal returns don't reflect the true purchasing power of your investments. When inflation rises, your buying power decreases even if nominal returns remain positive. As reported by Mint, the difference between nominal and real returns becomes critical for long-term planning. The simplified formula for real returns is Real Return ≈ Nominal Return − Inflation Rate, while the more precise Fisher equation provides more accurate calculations for higher inflation periods. This understanding is crucial for investors evaluating value fund performance over extended periods. The simplified real return formula shows how much your money actually grows in real terms after accounting for inflation, while the Fisher equation provides more precise calculations for higher inflation scenarios. When comparing nominal returns with inflation, investors must account for the fact that a 10% nominal return during high inflation periods may result in negative real returns.
Value mutual funds invest in stocks considered undervalued relative to their intrinsic value, aiming to benefit as markets eventually recognise their true worth. As reported by Mint, these funds carry higher risk because choosing the wrong stock can have substantial impact on portfolio returns. The investment approach involves buying quality companies at relatively attractive valuations, with the expectation that market recognition of their true value will drive performance over time. The newly launched NJ Value Fund follows this strategy, with fund managers Mr. Viral Shah & Mr. Dhaval Patel and benchmarks against Nifty 500 TRI and Nifty 500 Value 50 TRI. The scheme is classified as an open-ended equity scheme with investment predominantly in equity and equity-related instruments.
Financial experts suggest value funds may be suitable for investors with long investment horizons, as reported by Mint. Deepak Aggarwal, a Delhi-based chartered accountant and wealth adviser, noted that over long periods, value stocks tend to outperform growth stocks, making them a sensible investment choice. However, experts caution against exclusive reliance on value investing, with Sridharan Sundaram, Sebi-registered investment adviser, recommending a blended strategy combining value and growth approaches. The NJ Value Fund is designed for investors seeking long-term capital appreciation through equity and equity-related instruments, with the scheme suitable for those seeking capital appreciation over long term. When considering value investing, investors should remember that taxes and inflation can significantly reduce the real returns from nominal gains, making it essential to focus on after-tax real returns for accurate wealth accumulation planning.
According to Mint reports, value and growth investing tend to outperform at different stages of the market cycle. Sundaram highlighted that between 2020 and 2022, growth stocks outperformed, while value stocks have done better since 2022. He recommends a multi-cap approach because value and growth investing complement each other, suggesting that having both can help create a balanced portfolio for investors seeking optimal performance across market cycles. The addition of NJ Value Fund to the existing lineup provides investors with another option to diversify their value fund exposure. For retirement planning, experts suggest stocks have historically outpaced inflation by 4 to 7 percentage points annually, making them essential for long-term wealth management. The main idea is not just achieving the highest returns but ensuring money grows faster than inflation over time, allowing for realistic purchasing power increases in the future.
