Build Your Value Fund Like Warren Buffett!4 min read
Warren Buffett once said, “Price is what you pay; value is what you get.”
What he meant by this is that losing money can happen when you pay a price that doesn’t match the value you get. So it’s always important to invest in things that are valuable. Before investing in a value fund, it is important to know that there are various types of mutual funds but have you ever wondered why?
Well, no two same investors have a similar approach to investing, they will have different risk-bearing abilities, their capital will be different and so will be their perceptions. This is why mutual fund companies offer various types of investing schemes.
Each one is unique and structured in a way that makes it appealing for all types of investors. One such fund which is designed to attract value investors is known as a value fund. A value fund follows an investment strategy known as value investing, the idea is to invest in stocks that are undervalued in price based on fundamental analysis.
The belief is that once the market realizes the true value of such stocks their price will increase creating wealth for the investors. Not all stocks in the market are indicative of their true worth. The method for finding out such undervalued stocks is by calculating the intrinsic value of stocks.
There is no fixed method to calculate the intrinsic value of a company. The fund manager calculates it based on various factors like the company’s business model, financials, management, and the fund manager’s own perception of the company.
As per SEBI (Securities and Exchange Board of India), a value fund is an open-ended equity scheme that follows a value investing strategy with a minimum investment of 65% of equity and equity-related instruments. This style of investing became popular because of the success of investors such as Benjamin Graham and Warren Buffett who are known for following similar strategies.
So as an investor if you do not have the right amount of time to put in the effort that is required to find such value companies. Then investing in a value fund can be one of the preferred way to go.
However, also remember that you should not be investing all your capital in such a fund because these funds are for ideally a very long investment horizon. A minimum of 5 years of time is required for such funds to be profitable. These funds can be highly volatile so it is always better to have a highly diversified portfolio with investments in other stable mutual funds before investing in such a fund.
Who can invest in a Value Fund?
- Aggressive investors who are ready to take selective bets for higher returns.
- Investors who know macro trends.
- Investors who have patience in value investing
- Those who are looking for a long-term investment that can grow steadily with no unexpected gains.
Note: Investors investing in a value fund should be prepared to digest moderately to high losses even when the market performance is better.
How to invest in Value Funds?
There are two ways you can invest in this fund – Online and Offline.
#1 Online Investment in Value Funds
- Visit online brokers like Paytm Money (Note: Paytm Money offers direct mutual funds thus do not charge any brokerage fees on purchase of mutual funds), or search for asset management companies (AMC) online and look for value funds
- Compare the details of the similar schemes
- Estimate the fund’s future value
Value fund investment is all about choosing a trustable company, knowing the intrinsic value of stocks, and being a diligent investor to make profits and create wealth.
#2 Offline Investment in Value Funds
- Visit the nearest fund house office
- Keep your documents in hand including – Cancelled Cheque, Address Proof, Identify Proof, Passport Size Photo, PAN Card, KYC documents.
- If you cannot locate a fund house, you can also approach a broker.
Axis Value Fund is an open-ended equity scheme following a value investment strategy. This fund is for capturing the long-term appreciation of stocks that have the potential to improve and re-rate to play a contrarian or a value strategy.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Such representations are not indicative of future results. Paytm Money Ltd SEBI Reg No. INA100009859 Regd Office: 136, 1st Floor, Devika Tower, Nehru Place, Delhi – 110019. The NFO offering is non Exchange traded products and Paytm Money Ltd (PML) is acting as an agent for distributing the same. Please note all disputes with respect to the distribution activity, would not have access to the Exchange investor redressal forum or Arbitration mechanism. The securities quoted are exemplary and are not recommendatory. This information is purely based on publicly available data and in no way to be considered as advice or recommendation