Value Funds: buying cheap, waiting patiently

Value funds follow the oldest playbook in investing: buy companies for less than they are worth, then wait for the market to agree. SEBI requires the category to follow a stated value strategy with at least 65% in equities. In practice that means portfolios full of unfashionable businesses — solid cash flows, low price-to-earnings or price-to-book multiples, temporarily out of the spotlight.

How value behaves — the style cycle

Value is not a smoother ride; it is a different ride. Markets swing between phases where investors pay any price for growth stories and phases where cheap, dull cash generators get re-rated. A value fund can trail a growth-tilted fund for two or three years, then compress five years of catch-up into eighteen months. Judging a value fund on a short window almost guarantees you sell precisely before its turn. Use rolling returns across 5-7 year windows to see through the cycle.

A worked example

Two investors SIP ₹10,000 for 10 years. Fund G (growth style) returns 14% in years 1-6, then 6% in years 7-10. Fund V (value) does the reverse. Both average out similarly — near ₹23-24 lakh on ₹12 lakh invested — but their order of good years differs completely. Holding both styles is why many investors pair a value fund with a growth-leaning flexi-cap fund: when one style stalls, the other often carries the portfolio.

What to check before buying

• Is it actually value? Compare the fund's average P/E with its category — some "value" funds quietly hold popular growth names.
• Manager tenure and patience: the strategy only works if the manager survives long enough to be right; frequent manager churn defeats it.
• Your own patience: the fund's discipline is useless if you exit during its unloved stretch.

Who they suit — and common mistakes

• Good fit: long-horizon investors who want style diversification next to growth-oriented holdings and can ignore multi-year leaderboard envy.
• Mistake 1: buying value right after its best year and expecting a repeat — style leadership rotates.
• Mistake 2: comparing a value fund against the Nifty 50 growth darlings every quarter.
• Mistake 3: confusing "cheap fund NAV" with value investing — a low NAV means nothing; the style is about cheap businesses, not cheap units.

Equity taxation applies (20% short-term; 12.5% long-term above ₹1.25 lakh a year). Screen the category with valuation and consistency filters in the MF screener. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.

→ Screen value funds in the MF screener.