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Passively Active: All about value-based factor funds
An investor education & awareness initiative by Mirae Asset Mutual Fund
In its latest investor education and awareness initiative called Passively Active, Mirae Asset Mutual Fund explains value based smart beta funds.
What is value factor funds?
- Value is a smart beta strategy that picks stocks which are trading at a lower price compared to their intrinsic value
- Intrinsic value of stocks is captured by evaluating Return on Capital Employed (ROCE) with 40% weightage, price to earnings (PE) ratio (30% weightage), Price to Book (PB) ratio (20% weightage) and dividend yield (10% weightage)
- Some of the popular indices that are used as a benchmark for value-based factor funds include Nifty 50 Value 20 Index, Nifty 200 Value 30 Index and Nifty 500 Value 50 Index
- (Source: AMFI AUM data as on October 2024).
- Often, value factors are used to create multifactor indices by combining alpha, quality and low volatility like Nifty Alpha Quality Value Low Vol 30 Index
What are the key benefits of value funds?
- Offer meaning diversification to equity portfolio
- No sector or size bias
- You may combine value factor with other smart beta factors for risk diversification
Risks involved
Value indices may continue to remain undervalued for longer periods depending upon the market- Stock selection is completely driven by the price of stocks in the prevailing market conditions
What is the utility of this fund?
- Investors with high risk and adequate time horizon may consider this fund
- Provides meaningful diversification to equity investment portfolio as majority of schemes are relatively growth oriented
Conclusion
Value funds might be a good choice for investors as it offers meaningful diversification to equity portfolio.
An Investor Education and Awareness Initiative by Mirae Asset Mutual Fund.
All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (RMF). For further information on KYC, RMFs and procedure to lodge a complaint in case of any grievance, you may refer the Knowledge Center section available on the website of Mirae Asset Mutual Fund.
The information contained herein is compiled from third party and publicly available sources and is included for general information purposes only. Views expressed here cannot be construed to be a decision to invest. The statements contained herein are based on current views and involve known and unknown risks and uncertainties. Whilst Mirae Asset Investment Managers (India) Private Limited (the AMC) shall have no responsibility/liability whatso- ever for the accuracy or any use or reliance thereof of such information. The AMC, its associate or sponsors or group companies, its Directors or employees accepts no liability for any loss or damage of any kind resulting out of the use of this content. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein. Any reliance on the accuracy or use of such information shall be done only after consultation to the financial consultant to understand the specific legal, tax or financial implications.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
