Find the best Value-Oriented fund for 2022 and review the selection process and the performance of the best Value-Oriented fund of 2021
We will find the best Value fund to invest in 2022 and the selection process and review the best value fund performance in 2021.
What is a Value Fund?
A mutual fund that can invest irrespective of companies’ market cap restrictions based on the fund manager’s discretion where companies offer great value is known as a value fund.
The difference between a Flexi-cap fund and a value fund is in allocating capital to large, mid, and small-cap companies. Flexi-cap fund has to allocate funds to each large-cap mid-cap and small-cap company in a fixed ratio. In contrast, a value fund invests in companies available for a price that offers value.
So ideally, those who are looking for better returns should consider a value fund over a Flexi-cap fund.
However, the best approach is to invest directly in value stocks. As an individual retail investor, the process of finding value stocks can be a double edge sword. So one can leave it to the professional fund manager to find value for us.
Top Value Funds
To find the best Value Funds, we will use the process – from the 4 and 5 rated direct value funds by VRO, and we will choose the funds that can outperform.
Best Value Fund To Invest in 2022
To process to find the best value fund to invest in 2022 is not as simple as the best large-cap fund, best mid-cap fund or best small-cap fund where we do some kind of AUM or expense ratio to conclude the best fund.
Fund managers can have a different view of value. For example, in 2021, I believed that the healthcare sector would outperform: Unfortunately, one can’t say the same for 2022.
However, in 2022, my view is Indian IT services sector will do well.
So I will select the best fund based on maximum exposure to the Indian IT services sector.
| Fund | Top 3 Sectors | IT Sector Allocation |
|---|---|---|
| ICICI Pru Value Discovery | Energy, Fin, Com | Underweight |
| Invesco India Contra | Fin, Con, Tech | Inline |
| Kotak Ind EQ Contra | Fin, Tech, Energy | Overweight |
| Nippon Ind Value | Fin, Con, Tech | Underweight |
| SBI Contra | Fin, Services, Con | Underweight |
| UTI Value Opp | Fin, Tech, Healthcare | Overweight |
Fin = Financials, Tech = Technology, Con = Construction, Com = Communication
So depending on whether you have a similar view for the IT sector, your best value fund can vary. For example, Bank Nifty is underperforming Nifty 50, and so you can choose the best value fund that has underweight on Financials as well.
UTI Value Opp
No points for guessing. I think in 2022, the IT services sector will do well. So my choice of the best value fund for 2022 has to be UTI Value Opp Fund.
ICICI Prudential Value Discovery
Suppose I have to select fund underweight on Financials; it has to be the ICICI Prudential Value Discovery Fund. It is because financials led the last bull run so that the next bull run financials will underperform.
How has The Best Value Fund of 2021 Performed?
The best Value fund of 2021 was UTI Value Opportunities Fund. It has given a good return of 30% for the past year.
Though it is not a great ROI but good for sure.
Final Thoughts
Do not switch funds every year and pay the entry and exit load or long term capital gains tax.
Suppose you have not selected a better performing fund earlier or want to move to a new fund for any other reason (move to regular to direct funds). Then, don’t exit the investment in the old fund. Instead, stop the SIP and let the invested amount remain and grow over time in those funds. Then, create a new SIP in the new funds.
As always, this isn’t an endorsement of any fund. Instead, the emphasis is on the process. The funds may be doing well now, but use a similar approach and find the best fund to invest in when you want to invest. Use ValueResearchOnline and CRISIL as and when you want to invest in 2022.
Compared to value funds, small and mid-cap funds can be riskier?