Consider a client who walks into your office with two different fund factsheets, questioning why one is labeled ‘Growth’ and the other ‘Value’ despite both investing in Indian equity markets. As an MFD, you need to explain that this distinction is not merely academic; it represents a fundamental difference in how a fund manager bets on a company’s future.
A growth-oriented manager is like a scout looking for the next star performer, focusing on companies that are expected to grow their earnings faster than the overall market. These companies often command higher valuations, trading at high price-to-earnings multiples because investors are willing to pay a premium for that rapid expansion.
In contrast, the value-oriented manager behaves more like a bargain hunter in the street market of Dalal Street. They seek out companies that appear temporarily unloved or undervalued by the market, perhaps due to a short-term setback or industry-wide pessimism, yet possess strong underlying fundamentals. The strategy here is ‘mean reversion’—the manager expects the stock price to eventually rise toward its intrinsic worth as the market corrects its earlier oversight. This is a classic contrarian approach that requires immense patience from both the manager and the investor.
Your role in this conversation is to assess which strategy aligns with the client’s psychological tolerance for volatility. A growth fund may experience sharp price corrections when market sentiments shift, as these stocks are often expensive and sensitive to interest rate hikes. A value fund, while potentially offering a margin of safety, might underperform for long periods if the market refuses to recognize the value the manager sees in those ‘cheap’ stocks.
Your guidance in explaining these phases of underperformance is the tangible value you add as an MFD, ensuring the client remains invested during the cyclical swings of the Indian markets.
Choosing between these two is rarely about picking a ‘winner’ but rather about building a portfolio that captures different market cycles. Many savvy investors prefer to blend both strategies to dampen volatility, as growth and value often perform well at different times. By framing these styles correctly, you move the conversation away from chasing recent returns and toward understanding the underlying engine driving their investments.
Nuance
Check Your Understanding
An investor approaches you wanting to invest in a scheme that focuses on companies with high historical earnings growth and strong momentum. Which investment philosophy should the MFD prioritize in this selection?
During a portfolio review, you notice a fund manager frequently buys stocks when their price-to-earnings (P/E) ratio is significantly lower than the industry average. This indicates which style of management?
This is a companion read for Section 12.3 — Scheme Selection based on investment strategy of mutual funds from Ace the NISM Mutual Fund Distributors Exam by Akhilesh Gururani, available on Amazon Kindle.
Copyright © 2026 Akhilesh Gururani. All rights reserved.