Investor should rebalance portfolio after surge in value fund returns

Investors must blend growth and value styles, enter with minimum five-year horizon

Over the last year, value funds have delivered a category average return of 46.8 per cent to investors, outperforming most diversified equity categories, barring midcap and smallcap funds. Investors must temper their return expectations from these funds after their stellar performance.

 What are value funds?

Value fund managers pick stocks using valuation parameters such as low price-to-earnings ratio, low price-to-book value, high dividend yield, or high free cash flow. Some calculate the stock’s intrinsic value (using approaches like discounted cash flow) and compare it with its market value.