What is the difference between Value Funds and Multi-Cap funds

Sometimes, these funds can be similar but they are not the same. Value mutual funds and Multi-Cap fundsare mutual fund schemes are trying to spot business which are out of favour and obtainable at a discount. The fund manager thinks that these stocks are worth much more than that of the price they can be obtained at.

In a broad sense, all stocks can be either value based or that of growth based. Growth stocks are wherein the investors are willing to pay a premium because the company is growing much quicker. Because a company is growing more rapidly, it will earn more money and because of that folks are willing to pay a higher price to attain that higher growth. So, multicap funds can be a blend of value as well as growth and it will essentially be invested in all sizes of companies. So, it is needless to say that multicap is a perfect representation of all sizes of businesses or companies in your portfolio – large, mid and even that of small. Value funds are not at all designed to be multicap at all times.

Value Funds

For five to seven years, it would be good if you use a combination of both value and multicap funds. Value mutual funds demand a greater range of patience. There are not enough pure value mutual funds. Sometimes there are, but very few. Most of the funds try to do well consistently over time and have followed an absolutely lenient definition of value.

Value investing is as if you know exactly what you are paying for the current day rather than speculating over what you might possibly get in future. And value lies in something available presently at a discount or at a price lower than its actual worth. You know what these value mutual funds not just offer diversification but ensure that your portfolio is guarded during a downturn.

Diversification

This is a main reason for investing a part of your portfolio in value funds. You know Value mutual funds cater a good strategic fit as they give diversity to most portfolios wherein the majority of funds are probable to be growth-oriented. As different investment strategies work well in various market environments, diversification across investment styles (growth and value) make sure that a part of your portfolio shall do well at all times.

Better protection in downturns

Yes it is true that the valuations of growth mutual funds can sometimes step in the bubble territory. During a downturn, such are the funds that can tumble hard. Value investing incline to ensure a lower downside than that of the overall market as it concentrates on cheaper stocks and those that are out of favour. Value mutual funds are less susceptible because they are not invested in stocks that have high expectations linked with them. Of course, when there is less risk there would be more peace of mind.