Invest in Best Contra Funds in India 2024

Discover the best Contra Funds to invest in India for 2024. Learn who should invest, key benefits, risks, and find the top performing Sector funds.

What are Contra Funds?

Contra funds are the type of funds that follow a contrarian approach wherein the fund manager invests in funds that are currently undervalued but have strong growth potential in the future. The fund manager believes that the stocks have been undervalued due to short term market sentiments, but would bounce back in the near future

Who Should Invest in Contra Mutual Funds?

• Long-Term Investors: Individuals with a long-term investment horizon, typically five years or more can invest in this fund
• Risk-Tolerant Investors: People who have high risk tolerance can invest in this fund as they have high potential to grow in the future
• Value Investors: Investors who believe in the principles of value investing and are interested to explore undervalued stocks
• Experienced Investors: Individuals with a good understanding of market workings and an ability to withstand market fluctuations

Best Contra Funds – 6 Months Performance

Factors to Consider While Investing in Contra Mutual Funds

• Fund Manager’s Expertise: Evaluate the fund manager’s track record in managing this type of fund

• Fund Performance: Review the historical performance of the fund especially across multiple market cycles

• Investment Horizon: Ensure you have a long-term horizon as these type of funds take a while to realize its true potential

• Portfolio Composition: Analyse the Contras and stocks in the funds portfolio to understand the investment strategy

Major Benefits of Contra Mutual Funds

• Unconventional investment methodology: By investing in undervalued stocks, there is potential for significant capital appreciation for it to grow in the long run.
• Professional Management: Since they are managed by experienced fund managers with expertise in picking the correctly undervalued Contra, you can count on them to do their job right
• Acts as Hedge Funds: These funds can act as hedge funds against market corrections during a phase where markets are in a overvalued condition
• Buy low and sell high: Since they are underperforming at the time you pick, it would cost less, and when the stocks perform to their fullest potential, you can sell it at a higher prices
• Downside risk: Contra funds have lower downside risk compared to large-cap, mid-cap, and small-cap equity funds. This is because they always trade at a reduced rate compared to their valuations

Risks Involved in Contra Mutual Funds

• Estimation: The funds are already undervalued; you are buying it only based on the hope that it performs well in the future
• Selection Risk: Risk of the fund manager’s selection of undervalued equity stocks not performing as expected.
• Contra Concentration Risk: Potential overexposure to certain Contras that may remain out of favor for longer periods.

Frequently Asked Questions (FAQs) about Contra Mutual Funds

1. What is a Contra Mutual Fund?

A Contra Mutual Fund is an equity fund that invests in stocks currently that are undervalued, but is expected to perform well in the future

2. How does a Contra Mutual Fund differ from a regular equity fund?

Unlike a regular equity fund, where the fund manager invests on the best performing stocks, here the fund manager follows a contrarian approach wherein, they invest in undervalue stocks and wait for it to perform better

3. Who should consider investing in Contra Mutual Funds?

Long-term, risk-tolerant, and experimental investors can try out this fund

4. How long should I stay invested in Contra Mutual Funds to reap profit?

You need to stay invested for a minimal tenure of 5 years atleast to witness the fund perform well and reap

5. Are Contra Mutual Funds risky?

Yes, they are risky compared to other funds as the investment is made on the undervalued Contras with the hope that it will raise further. If the funds do not realize their true potential, then the investor might be in for a loss