Value fund is a type of equity mutual fund. It is that fund which is at present deemed to be of less value but its value is likely to increase in future. The value funds give high return and dividends in future.
While investing in value funds, an investor or a fund manager analyses the present inefficiencies of the market that makes the stock of an enterprise undervalued but once these inefficiencies are rectified, there is a rise in the price of those stocks.
Why to Invest in Value Funds?
The reasons why you should invest in Value Funds are:
- Diversification of funds.
- Better protection in downturns as they do not invest in high value stocks.
- Established strategy.
Why not to invest in Value Funds?
- There is a risk in investing in Value Funds. You may invest in the shares of an enterprise anticipating the future rise in the price but it is possible that this rise may never occur; instead the value may lower down.
- The value funds don’t invest in high growth and high valuation shares therefore there is a probability that these funds may under perform as compared to other shares.
