Looking for long-term investment options? Review the top-performing mutual funds of the last 10 years, including their annualized returns and strategies for sustained growth. Before investing in mutual funds, it’s crucial for investors to thoroughly assess the performance of various schemes within the same category. This evaluation provides insight into a scheme’s historical performance and helps set realistic expectations for its future returns.
Importance of Long-Term Performance Evaluation
A mutual fund scheme that has recently delivered exceptional returns might appear attractive. However, such performance can sometimes be an anomaly, often resulting in an overvaluation of the scheme. Consequently, it’s unrealistic to expect the same level of performance to continue indefinitely. For a more accurate assessment, investors should compare a scheme’s performance with its peers over an extended period, typically around 10 years. This long-term perspective offers a more reliable indicator of a fund’s potential and stability.
Introduction to Value Funds
Value funds are mutual funds that invest primarily in undervalued stocks, with at least 65% of their portfolio allocated to equities. These funds aim to capitalize on stocks priced lower than their intrinsic value but are expected to appreciate over time.
According to the Securities and Exchange Board of India (SEBI), a mutual fund house can offer a value or contra fund. Both strategies focus on identifying mispriced securities, but while value funds look for undervalued stocks, contra funds invest in underperforming or unpopular sectors with potential for recovery.
Top-Performing Value Funds Over 10 Years
Over the past decade, several value funds have stood out for their exceptional performance. Here are the top-performing value funds based on their 10-year annualized returns, as reported by the Association of Mutual Funds in India (AMFI) as of January 6, 2025:
- JM Value Fund: This fund leads the pack with an impressive 17.40% annualized return and has delivered consistent performance over the decade, making it a top choice for value investors. Despite being the smallest fund in assets under management (AUM) at ₹1,095 crore, its strategic investments have paid off significantly.
- Bandhan Sterling Value Fund: This fund has also shown remarkable returns, closely trailing JM Value Fund with robust annualized performance. Its well-diversified portfolio has contributed to its success.
- Tata Equity PE Fund: Known for its prudent stock selection, this fund has generated substantial returns, reinforcing its position as a reliable value fund.
- ICICI Prudential Value Discovery Fund: With the largest AUM of ₹48,439 crore among the top performers, this fund has leveraged its size to optimize returns while maintaining a diversified portfolio. It has consistently provided strong returns, making it a staple for many value investors.
- HSBC Value Fund: Another strong contender, this fund has delivered competitive returns, showcasing its ability to identify and invest in undervalued opportunities effectively.
Why Long-Term Performance Matters
Investing in value funds requires patience, as the strategy hinges on the market recognizing and correcting the undervaluation of chosen stocks. Over a decade, the top-performing value funds have demonstrated the efficacy of this approach, providing investors with significant returns and reinforcing the importance of long-term investment horizons.
Conclusion
Value funds present a compelling option for investors looking to maximize returns through strategic investments in undervalued stocks. By examining the long-term performance of these funds, investors can make informed decisions that align with their financial goals and risk tolerance. As the top-performing value funds have demonstrated over the past 10 years, disciplined investment in value opportunities can create substantial wealth.
