DSP Value Fund NFO – Does this create value to your portfolio?
DSP Value Fund NFO Review
DSP MF is planning to launch Value Fund that would open for subscription from 20th November, 2020. DSP Value Fund is an open ended scheme that follows value investment strategy. Under this strategy, fund would invest in undervalued stocks that has potential to multiply money in long term. Should you invest in DSP Value Fund NFO? What are the various risk factors associated with such funds?
DSP Value Fund (NFO) – Issue details.
This is an open-ended equity mutual fund scheme. Here are the NFO issue details.
|DSP Value Fund – NFO Issue Details|
|Scheme reopens for continous purchase/sale||Within 5 days from closing date|
|Minimum investment (Lumpsump)||Rs 500|
|Minimum investment (SIP)||Rs 500|
|NAV of the fund||Rs 10 during NFO period|
|Exit Load||1% if exited within 1 year|
|Risk||Moderate High Risk|
|Max Total expense Ratio (TER)||2.25%|
|Benchmark||Nifty 500 Value 50 TRI|
|Fund Manager||Mr. M. Suryanarayanan (Equity)
Mr. Jay Kothari (Overseas)
What is the investment objective of this MF scheme?
The primary investment objective of the scheme is to seek to generate consistent returns by investing in equity and equity related or fixed income securities which are currently undervalued.
There is no assurance or guarantee that the investment objective of the scheme will be realized.
What is the allocation pattern in this mutual fund?
This fund investment pattern is as follows:
|Type of instruments||Min %||Max %||Risk Profile|
|Equity and equity related instruments incl derivatives||65%||100%||Medium to High|
|Debt, Securitized debt and Money Market instruments||0%||35%||Low|
|Units issued by REITs & InvITs||0%||10%||Medium to High|
Why to invest in DSP Value Fund NFO?
Here are a few reasons to invest in such mutual fund schemes.
1) This fund invests based on value investing i.e. invest in undervalued stocks. Such stocks can perform well in the long term.
2) Investing in value funds can offer better diversification for long term strategy as most of such stocks are growth oriented (not shot term in nature)
3) Excellent protection durning down turns. Since such funds invests in under valued stocks, there could be good protection against stock market crash.
4) Value investing is considered as one of the most successful investment strategies across the world.
5) Value funds gave stable and consistent returns in the last 7-10 years.
Some key risk factors you should consider before you invest in such funds
Everything does not look rosy for value funds. Here are some negative and risk factors in value funds.
1) There is value trap in value investing strategy. Fund manager may consider under valued, but others might not think so. In such case the stocks, a fund manager believes good, can further fall.
2) Value funds can be identified in bear market or bull market. In case of bull market, while majority of the stocks keep moving in positive direction, value funds tend to go in opposite direction or with no significant movement.
3) If the stock is under priced, there could be several reasons. There could be even corporate governace issues where the company might have potential, but may be under valued due to this.
4) This fund invests in debt instruments where there are interest rate risks, liquidity risks and default risks.
5) It also invests in REITs and InvITs which are high risk.
6) You can refer complete risk factors of investing in this particular scheme in SID / KIM / NFO prospectus.
Past Performance of Value Funds
Here is the quick snapshot on the performance of the existing funds from this category.
DSP Value Fund NFO – Should you invest?
DSP Value Fund invests based on value investment strategy i.e. investing in undervalued stocks. Fund manager invests in inexpensive stocks that are out of favour and price discovery takes longer time. Many investors would not have patience as they look for good performance in short term or atleast in medium term. Such investors can avoid value funds. Investors who want to lock their money for long term by investing in value funds can invest in such funds. If you do not want to test new funds, you can invest in some of the existing value funds that have already proven its performance.
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