How to identify value funds in Australia?

  • Dec 02, 2019 AEDT
  • Team Kalkine
How to identify value funds in Australia?

A managed fund is an investment fund which is managed by a professional fund manager who is an expert to invest in variety of instruments. The portfolio of managed funds is dependent on the Fund Manager and it’s his call to decide the constituents of the fund.

In a managed fund, money from people is pooled together and then the Fund Manager or the Investment Manager buys or sells shares on people’s behalf. The value of the fund will depend on the price of the shares and will move accordingly.

A Managed Fund:
  • Is run by investment professional;
  • Invests according to the fund’s investment objective;
  • Can have an investment objective ranging from conservative to aggressive-conservative funds generally earn smaller returns with less risks, while aggressive funds generally offer potentially higher returns with greater risks.
Types of Managed Funds Someone Should Invest In:

A financial advisor can help determine the types of funds that are most appropriate based on the investment goals like time horizon, current financial position and attitude towards risk.

Reasons to Own Managed Funds:

Growth Potential: Managed Funds can earn money in three ways: 1) Appreciation- Fund shares increase in value or appreciate when securities the fund owns increase in total value, 2) Capital Gains Distribution- Capital gains result when fund managers sells securities owned by the fund at the profit. As a shareholder, one can choose to re-invest the distribution in additional fund shares or receive cash, 3) Dividends- Shareholders may receive dividends generally quarterly when companies in which the fund is invested distribute a portion of their profits. As a shareholder, we can choose to receive dividends or reinvest the dividends in the funds.

Source: Invesco Aim Management Group Inc.

Diversification: Diversification may protect from market highs and lows because it’s not too heavily invested in one company or industry. It simply means all the eggs are not in one basket. Managed funds allow one to diversify assets among a variety of investments so one can take benefit of strong areas of market and reduce the risk when other areas of the market perform badly.

Professional Money Management: Managed funds are generally controlled by a portfolio manager who is supported by a team of knowledgeable investment specialists. This team bases its buying decision on extensive, ongoing research and analysis which means one does not have to spend multiple hours performing its own research.

Convenience and Flexibility: Managed funds offer many suitable features which includes exchange privileges, liquidity and automatic investment plans. Buying and selling managed fund shares is very easy and the money is readily accessible because mutual funds are liquid assets.

Within a fund company, one can generally move portion of investment into other funds with different objectives as the financial situation changes with no additional sales charge. Investing the same amount of money on a regular basis, such as weekly or monthly, is a convenient way to benefit from changing market price because as the market prices go up and down, regular investment can buy some shares at a lower price and some at higher price and in the long period, the price per share will average out.

Basic Types of Managed Funds
  1. Stock or Equity Funds: These types of funds invest primarily in shares of company stocks and some even focus on companies with a specific industry or sector. Companies range from small to mid-sized companies to large, well established companies with strong financial structure and balance sheet. There are many types of stock funds that offer varying degrees of risk and return potential;
  2. Balanced Funds: These types of funds invest in both bonds and stocks to balance the growth potential of stocks with relative stability of bonds;
  3. Bond Funds: The bond funds invest mainly in municipal, corporate or government bonds and can be either taxable or non-taxable which are typically designed to protect principal and provide income through regular dividend payments;
  4. Money Market Funds: These types of funds invest in securities like treasury bills and convertible debentures that mature in one year or less and these are considered to have minimal risk and their returns are typically just a bit higher than those of savings accounts.
The difference between Growth Funds and Value Funds

The growth funds have growth stocks in their portfolio, which generally are expected to perform better than the overall market. These growth stocks are likely to perform best when the state of the economy is in the mid to late phase of the business cycle and when corporate profits are healthy. These funds generally don’t buy the big blue-chip companies, but they buy mid to small cap companies because of their good growth potential.

Value funds are those funds that mainly invest in value stocks, which the fund manager believes are available at a low price in relation to their fundamental measures and low price to earnings ratio. In simple terms, the value fund manager wants to find a bargain and looks for the stock that are selling at a discount.

Value Fund Portfolio

The value investor is interested in receiving steady investment income and preserving capital. He or she is less sensitive to short term volatility than the conservative investor.

Value Fund Portfolio

Moderate Portfolio Source: Invesco Presentation

Growth Fund Portfolio

The growth investor is expecting for higher return from the portfolio, because he or she usually has a relatively high-risk tolerance and long-time horizon and they are generally not concerned about short term volatility.

Growth Fund Portfolio

Growth Portfolio Source: Invesco Presentation

Things to Check Before Investing in Value Funds

One can use the following quick reference points that will act as a guide to watch out for where to do a little study before making investment decisions.

  • Set the goals: First get the motive of investment, for example whether saving for retirement or for a deposit on a house;
  • Decide whether to take advice or make an alone decision;
  • Timeframe of the investment one wants to make;
  • There are generally three types of investor; aggressive, conservative or both. This effects the way one invests;
  • Understand the risk;
  • Managed funds are not immune to taxes;
  • Don’t remain focussed on timing the market but think of other strategies such as dollar-cost averaging;
  • Keep a track of the fund and if the performance isn’t matching expectations, one may need to rethink his/her strategy.


This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.


All pictures are copyright to their respective owner(s) does not claim ownership of any of the pictures displayed on this website unless stated otherwise. Some of the images used on this website are taken from the web and are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it below the image.


There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.

Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.

As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK