VR Logo

What should be the proportion of growth and value stocks in my fund portfolio?

In recent years, value funds have not done well. But markets are cyclical and if you have enough patience, you can have some allocation to them, suggests Dhirendra Kumar

What should be the proportion of growth stocks and value stocks in one's mutual fund portfolio? Most of the funds are overweight on growth stocks right now.
- Santosh Zalavadiya

Yes, most of the funds are overweight on growth stocks. But there are many funds that have been very disappointing and they have somewhere in the range of 25-30-40 per cent into value stocks and they have struggled and have been very disappointing. They were erstwhile big-time winners and are some of the largest funds in the country. Hence, some investors of these popular funds are now asking about their concerns over their investments.

My answer is that you should have 25 per cent allocation to value-oriented funds as well because all parts of the markets are cyclical and things turn around when you least expect it. Nevertheless, these funds have been extremely disappointing for long. If you believe in reversion to mean, you should have some allocation to value strategy as well.

But I think growth is important over a period of time. Great companies which are growing rapidly should form a substantial part of your portfolio. So, it is very difficult to allocate that because you have many multi-cap funds which will have many of those value-oriented stocks as a part of their portfolio. So, how would you segregate them? They are not clearly classified as value funds. So, if you have to do that deliberately, then you may allocate 75-80 per cent of your portfolio to multi-cap growth funds and 20 per cent to value funds. But you need patience with this strategy because over the last four-five years, value funds have been extremely disappointing.

Post Your Query