Planning to invest in value funds? Performance hinges on earnings recovery

'Invest with a 7-10-year horizon. Allocate 20-30 per cent of your equity portfolio to them,' says Vishal Dhawan, chief financial planner, PlanAhead Wealth Advisors

In 2020, value funds gave investors a sound category average return of 15.1 per cent. The last time these funds had rewarded investors richly was in 2017, when they had given a category average return of 41.6 per cent. The next two years, 2018 (minus 9.6 per cent) and 2019 (1.8 per cent), were disappointing. However, investors who kept the faith have been rewarded this year.

Market preference shifting

Over the past three-four years, growth had got concentrated in a few stocks. As interest rates fell, the limited stocks that could offer growth got rerated to very high levels. In