The Mutual Fund Show: Growth Vs Value Approach — What Should You Choose?

If you're looking to grow your mutual fund investments, it's time you paid attention to the investing style adopted by the fund house in question. Often, it can involve growth or value investing—or both. And importantly, how does it affect you?

"Value investing targets undervalued stocks below (their) intrinsic worth for potential high returns. Therefore, investors would select a stock that is priced lower than its intrinsic value and wait for the value to be realised," Prathiba Girish, founder of Finwise Personal Finance Solutions, said on The Mutual Fund Show.

"Fund managers are using a mixed approach, integrating both value and growth strategies," she said.

An inclusive approach that encompasses various fund managers and styles under one umbrella, while implementing and managing different strategies across various schemes, has consistently proven successful, according to Mohit Gang, co-founder and CEO of Moneyfront.

"Growth strategy is mostly followed by Axis AMC, Mirae Asset, UTI AMC and Tata AMC, while ICICI Prudential AMC and HDFC AMC follow the value strategy," said Gang. "But, these days, everyone has all the approaches under their banner."

When examining the MSCI India Index, it is evident that over a 14-year period, starting from 2010, growth-focused funds outperformed, with the exception of 2011 and 2015, Girish said. "Subsequently, value-focused funds demonstrated superior performance," she said, adding: "Specifically, value-focused funds outperformed in four out of the five most recent years."

"In my opinion, there is no definitive judgment on which is superior, as it varies based on the time frame," she said.

"Investors need to diversify their portfolio with various approaches, including a couple of pure value-based funds and pure growth funds, as well as factor-based passive indices known as Smart Beta Funds," Gang said.

Girish concurred. "Investors have the option to select market capitalisation-based allocation funds, wherein they can choose some as value and others as growth," she said. "It's widely understood that all investments will yield returns when held over the long term."

Girish said investors have lost interest with environmental, social and governance, or ESG, funds.

"Many environmental, social, and governance funds were launched after the Covid-19 pandemic. Even now, there are only eight funds in this particular category," she said.

"The fund's name initially generated excitement among people to invest in it, but the Ukraine war and the increase in defence and fossil fuels caused both to be excluded. "

As a result, the returns have somewhat stagnated over the past four years, leading to a gradual loss of interest among investors, she said.

"Its early days for the theme in India," Gang said on such funds. He listed the reasons for the same:

• They've performed below par.

• Net outflows for the last two calendar years.

• Retail investors aren't so keen on sustainable themes.

• Difficult for investors to relate how it translates into good stock returns.

Query 1: I started these SIPs in 2017 and their total value is Rs 17 lakh. I want to stop the SIPs and keep the amount in the respective mutual fund for the next 15 years. What will be the estimated corpus after this time horizon? Will this strategy work or should I withdraw the amount and invest in a new scheme?

Name: Parikshit I Age: 45 years

Prathiba Girish: My advice will be to continue the SIPs if possible and if you can, then step up the amount every year.

Query 2: I want to invest Rs 5,000 as SIP. Can you recommend me a few funds?

Name: Laxminarasimhulu I Age: 78 years

Prathiba Girish: You may want to explore the option of investing in the Balanced Advantage Fund or Multi-Asset Fund. ICICI Balanced Advantage or Multi-Asset Funds could be a good choice for investment, as withdrawals may occur earlier compared to pure equity funds.