Value funds: Invest for style diversification, with 7-year horizon

While value-style funds have performed well post-2020, investors should enter them now not because recent performance will be replicated in the near future but to diversify their portfolios, which are often tilted in favour of growth funds. Only investors with at least a seven-year horizon should consider these funds at this juncture.

 

How do these funds work?

 

Value funds invest in stocks trading at a discount to their intrinsic value. “The price of a stock often fluctuates and goes below its intrinsic value due to multiple factors. A value fund identifies this gap and aims to benefit from this differential,”