We will find the best value-oriented mutual fund to invest in 2020.
A mutual fund that can invest irrespective of any market cap restrictions in companies where the fund manager finds value is known as a value-oriented mutual fund. The Multi-cap funds have a ratio of large, mid, and small-cap companies, whereas a value fund invests in companies that are available for a price that offers value.
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.
To find the best Value-Oriented Funds, the process we will use is- from the 4 and 5 rated direct funds by VRO, we will choose the funds that can outperform.
From the top Value-Oriented Funds, we will see the allocation in the top 3 sectors for each of the four funds.
| Fund | Top 3 Sectorial Allocation |
| Tata Equity PE Fund |
Financial, Energy, Automobile
|
| L&T India Value Fund |
Financial, Construction, Energy
|
| Invesco India Contra Fund |
Financial, Energy, Technology
|
| Kotak India EQ Contra Fund |
Financial, Energy, Technology
|
What we see is Financial sector allocation is highest in all the above funds. The allocation to the Energy sector is also quite high in all three funds.
So depending on whether you are bullish on the automobiles, construction on technology, your choice of best Value-Oriented fund to invest in 2020 will vary.
No points for guessing, I think in 2020, there is very little downside in the automobile sector. So my choice of the best value-oriented fund has to be Tata Equity PE Fund.
Moreover, it is one of those funds that have the lowest expense ratio in the Value-Oriented Fund category.
The best Value-Oriented funds of 2019 were Kotak India EQ Contra Fund and Invesco India Contra Fund.
Both the funds outperformed and has given better than benchmark returns.
Do not switch funds every year and pay the entry and exit load or long term capital gains tax.
In case 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). Don’t exit the investment in the old fund. Just stop the SIP and let the invested amount remain and grow over time in the past funds. Create a new SIP in the new funds.
As always, this isn’t an endorsement of any fund. The emphasis is on the process. The funds may be doing well now, but when you want to be investing, use the same process, and find the best fund at that time to invest. Use ValueResearchOnline and CRISIL as and when you want to invest in 2020.
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