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Value Funds and Growth Funds

What Are Value Funds And Growth Funds? Differentiate?

There are two types of funds offered by fund management companies - growth and value funds. Growth funds focus on consistent growth of your investment, while value funds focus on providing regular returns on your investment.

What are Growth Funds?

Growth funds focus on growing your investment over the long run for the purpose of long term capital generation. Growth funds do not offer dividend payment. The money pooled by the investors earns returns which is reinvested in the fund itself on a regular basis. The risk associated with a growth fund ranges from moderate to high. Growth fund comprise of the following portfolios - large capitalization (cap), small cap, mid-cap, micro-cap, diversified equity funds, etc.

Large cap growth funds invest in the stock of companies with a large market capitalization. The companies can be either domestic or international. Large cap growth funds offer good returns in the long run.

What are Value Funds?

Value funds are mutual funds that offer dividend value depending upon their stock performance. Such funds are often considered by investors who want regular returns. Value funds do not give immediate returns but provide good dividends. Dividends are given once the fund is performing well and has successfully clocked a good profit. Such funds also have a huge potential for growth in the near future.

Difference Between Growth and Value Funds

Both growth and value funds are ideal for an investment portfolio. The funds together balance out the risk associated with each other.

The key differences between growth and value funds are:

Growth FundsValue Funds
Focused on higher market growth for long term capital gainFocused on substantial growth with higher dividend payout
Growth funds are expensive, especially large cap blue chip fundsValue funds are less expensive due to the low cost of the underlying stocks
Ideal for long term investmentIdeal for regular income
Returns are regularly invested back into the fund itself Returns are distributed in the form of dividend
Growth depends on the performance of the fund, market volatility, fund manager, etc.Dividends payable depend on the profits declared, if any
Growth funds carry more riskValue funds come with less risk in comparison to growth funds
Growth funds are taxed as per LTCG while short term growth funds are taxed 15% flat.Debt fund gains are taxed at 20% with indexation and 10% without indexation.

Example of Growth Funds

SBI Blue Chip Fund

TypeOpen Ended Fund
Investment ObjectiveTo provide investors with opportunities for long-term growth in capital along with the liquidity of an open-ended scheme through an active management of investments in a diversified basket of equity stocks spanning the entire market capitalization spectrum and in debt and money market instruments.
AUM (Rs. Crores)23525.01
BenchmarkS&P BSE 500
RiskHigh
Fund ManagerSohini Andani
Return Rate 1 Yr (%)13.33%
Return Rate 3 Yrs (%)7.89%
Return Rate 5 Yrs (%)7.59%

Kotak Standard Multi Cap Fund

TypeOpen Ended Fund
Investment ObjectiveTo generate long term capital appreciation from a portfolio of equity and equity related securities, generally focused on a few selected sectors.
AUM (Rs. Crores)30546.45
BenchmarkNifty 50
RiskHigh
Fund ManagerHarsha Upadhyaya
Return Rate 1 Yr (%)19.97%
Return Rate 3 Yrs (%)12.56%
Return Rate 5 Yrs (%)11.34%

Example of Value Funds

L&T India Value Fund

TypeOpen Ended Fund
Investment ObjectiveTo generate long term capital growth from a diversified portfolio of predominantly equity and equity related securities, in the Indian markets with higher focus on undervalued securities.
AUM (Rs. Crores)7674.29
Benchmark S&P BSE 200 TRI
RiskHigh
Fund ManagerVenugopal M, Vihang Naik
Return Rate 1 Yr (%)13.72%
Return Rate 3 Yrs (%)6.29%
Return Rate 5 Yrs (%)9.19%

ICICI Prudential Value Discovery Fund

TypeOpne Ended Fund
Investment ObjectiveTo generate long term capital growth from a diversified portfolio of predominantly equity and equity related securities, in the Indian markets with higher focus on undervalued securities.
AUM (Rs. Crores)14728.88
BenchmarkNifty 50
RiskHigh
Fund ManagerMrinal Singh
Return Rate 1 Yr (%)4.81%
Return Rate 3 Yrs (%)3.08%
Return Rate 5 Yrs (%)4.02%
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