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Factor-based investing has gained significant attention in recent years as an alternative to traditional investment strategies. It involves selecting stocks based on specific factors that have historically been associated with above-market returns.
The most common factors include momentum, value, quality, volatility, and size. By focusing on these factors, investors can create a portfolio designed to capture the performance drivers that lead to long-term outperformance.
Bandhan Mutual Fund has recently launched two new factor-based offerings, these funds focus on two prominent strategies that is momentum investing and value investing, both of which have distinct principles and appeal to different types of investors.
[Read: 5 Top Performing Index Funds in India in the Last 3 Years]
Momentum Investing
The momentum strategy invests in winning stocks while cutting underperformers, based on the belief that recent successes will persist. It capitalizes on market trends, where the strongest performers are expected to continue their upward trajectory, while the weakest performers may continue to decline.
The strategy targets stocks that have shown strength and exits when downward trends are confirmed. It focuses on capitalizing on the prevailing market direction rather than predicting peaks and troughs. The Nifty 500 Momentum 50 Index captures the performance of the top 50 stocks with strong positive momentum.
[Read: Momentum Investing: All You Need to Know About Momentum Mutual Funds]
Value Investing
On the other hand, value investing focuses on identifying stocks that are undervalued by the market. Value investing targets stocks believed to be trading below their intrinsic value, based on the principle that cheaper stocks tend to outperform more expensive ones over the long term.
After an uneventful last decade, the value factor has come back roaring, reinforcing its relevance and potential for long-term investment success. Value investing requires patience and a long-term perspective, as it may take time for the market to recognize the inherent value of these companies.
The Nifty 500 Value 50 Index captures the performance of the top 50 with a high value score. The Value score is determined based on Earnings to Price ratio (E/P), Book Value to Price (B/P), Sales to Price (S/P), and Dividend Yield.
Here are the details of the two NFOs introduced by Bandhan Mutual Fund:
1. Bandhan Nifty 500 Momentum 50 Index Fund
Bandhan Nifty 500 Momentum 50 Index Fund is an open‐ended scheme tracking Nifty 500 Momentum 50 Index. The investment objective of the Scheme is to replicate the Nifty 500 Momentum 50 Index by investing in securities of the Nifty 500 Momentum 50 Index in the same proportion/weightage with an aim to provide returns before expenses that track the total return of Nifty 500 Momentum 50 Index, subject to tracking errors.
However, there is no assurance or guarantee that the objectives of the scheme will be realized and the scheme does not assure or guarantee any returns.
Under normal circumstances, Bandhan Nifty 500 Momentum 50 Index Fund will hold an allocation of 95% to 100% in Securities belonging to the Nifty 500 Momentum 50 Index (including stock and index derivatives) and 0% to 5% in Debt & Money Market instruments & Mutual Fund.
Exit Load –
Bandhan Nifty 500 Momentum 50 Index Fund will be managed passively with investments in stocks in proportion to the weights of these stocks in the Nifty 500 Momentum 50 Index. The investment strategy would revolve around reducing the tracking error to the least possible through rebalancing the portfolio, considering the change in weights of stocks in the index as well as the incremental collections/redemptions from the Scheme.
Bandhan Nifty 500 Momentum 50 Index Fund will be benchmarked against Nifty 500 Momentum 50 Index
Bandhan Nifty 500 Momentum 50 Index Fund will be managed by Mr Nemish Sheth
Bandhan Nifty 500 Momentum 50 Index Fund is open for subscription from October 14, 2024 to October 24, 2024. The fund will reopen for continuous sale and repurchase on October 30, 2024.
The minimum subscription amount for Bandhan Nifty 500 Momentum 50 Index Fund is Rs 1,000/- and in multiples of Re. 1 thereafter.
Bandhan Nifty 500 Momentum 50 Index Fund offers Direct Plan and Regular Plan. Under each plan the fund offers Growth and Income Distribution cum Capital Withdrawal (IDCW) Option.
[Read: Investing in High-Risk Mutual Funds: A Bold Approach]
2. Bandhan Nifty 500 Value 50 Index Fund
This is another recent offering in the passive investing space, providing investors with a hassle-free way to invest in the Nifty 500 Value 50 stocks.
Bandhan Nifty 500 Momentum 50 Index Fund is an open‐ended scheme tracking Nifty 500 Value 50 Index. The investment objective of the Scheme is to replicate the Nifty 500 Value 50 Index by investing in securities of the Nifty 500 Value 50 Index in the same proportion/weightage with an aim to provide returns before expenses that track the total return of Nifty 500 Value 50 Index, subject to tracking errors.
However, there is no assurance or guarantee that the objectives of the scheme will be realized and the scheme does not assure or guarantee any returns.
Under normal circumstances, Bandhan Nifty 500 Value 50 Index Fund will hold an allocation of 95% to 100% in Securities belonging to the Nifty 500 Value 50 Index (including stock and index derivatives) and 0% to 5% in Debt & Money Market instruments.
Exit Load –
Bandhan Nifty 500 Value 50 Index Fund will be invested primarily in stocks constituting the respective benchmark of the Scheme i.e. Nifty 500 Value 50 Index. A portion of the Scheme will be kept liquid to meet the redemption requirements in line with SEBI Regulations.
The Scheme intends to maintain a low tracking error by managing the portfolio in line with the index. A particular stock may be dropped or new securities may be included as a constituent of the index. In such an event, the Scheme will endeavour to reallocate its portfolio but the available investment/ disinvestment opportunities may not permit precise mirroring of the index immediately.
Bandhan Nifty 500 Value 50 Index Fund will be benchmarked against Nifty 500 Value 50 Index
Bandhan Nifty 500 Value 50 Index Fund will be managed by Mr Nemish Sheth
Bandhan Nifty 500 Value 50 Index Fund is open for subscription from October 14, 2024 to October 24, 2024. The fund will reopen for continuous sale and repurchase on October 30, 2024.
The minimum subscription amount for Bandhan Nifty 500 Value 50 Index Fund is Rs 1,000/- and in multiples of Re. 1 thereafter.
Bandhan Nifty 500 Value 50 Index Fund offers Direct Plan and Regular Plan. Under each plan the fund offers Growth option only.