Understanding Contra Fund Meaning

Contra funds is one category of equities mutual funds that primarily invests in stocks. Despite the significant dangers, this investment approach presents a remarkable chance for investors to generate exceptional profits. These funds take a contrarian stance, focusing on low-cost equities that the market is currently discounting. When the market eventually realizes the true value of these investments, they do so with the possibility of large long-term gains.

The emphasis is on the equities of organizations, which in the short term, don't do very well in terms of performance. It is expected to be an outperformer when the current problem with the performance or perception of equity is addressed shortly. That is what these contra funds bet on; they devise capital structures in such a manner that firms they invest in are capable of producing superior returns.

 

What are the Contra Funds Available in India?

At present, there are only three MF houses that are providing contra funds in India which include SBI Contra Fund, Kotak India Contra Fund, and Invesco India Contra Fund.

Scheme Name	NAV Direct	Return 1 Year (%) Direct	Return 3 Year (%) Direct	Return 5 Year (%) Direct	Daily AUM (Cr)
Invesco India Contra	84.48	33.17	19.40	20.25	8,194.50
Kotak India EQ Contra	90.71	33.81	19.29	19.76	1,173.34
SBI Contra Fund	210.48	54.63	24.89	18.66	3,451.66

 

What are the Benefits of Contra Funds Investment?

The main benefits of contra funds investment are as follows:

• Contra funds follow the opposite idea and if properly adjusted, such ideas can yield more than market average returns to the investors. The risk is always there but the returns may prove the risk worthwhile.
• Contrary funds are designed to identify companies that are generally not considered by most analysts and investors. Consequently, the research focus is constrained and therefore the effects, which institutional trades may have on this counter, are manifestly small.
• Normally, contra funds purchase stocks during a period when the contra fund justifies that the stock has underperformed and thus it will sell at a low price. Thus, the investors in contra funds themselves obtain good prices for contra stock.
• It is experienced to indicate that in periods of market shocks or sustained declines in the market, it is often the high beta stocks that post the steepest declines. In such cases, contra funds effectively act as a hedge as they preserve their value better than most other classes of funds.
• There is a lot of hidden value in most contrarian stocks, but this value will not be reflected by the stock price because of the visible issues associated with it. When these issues are overcome, normally there is a surge in the stock, as it plays catch up.

 

What are Demat Accounts?

To participate in the stock market, modern investors must comprehend what are demat accounts. In order to hold and trade securities digitally without the need for physical certificates, demat accounts, or demats, are necessary. Investors can quickly make trades, track their investments, and manage their portfolios with ease when they use demats.

Demat accounts also offer improved security and lower the possibility of theft or loss connected with physical certificates. Understanding what are demat accounts and their operations is essential for anyone wishing to invest in the stock market in order to trade effectively and securely.

 

Conclusion

Contra funds are appealing to investors who are willing to bet against the trend in the market. Since contra funds buy shares that are currently unpopular, the intention is to make huge gains from such stocks once these shares rise once more. Contrary to general funds investing in trendy stocks that enhance the market growth and value, contra funds attract investors seeking to add to their portfolio investment horizons by participating in contra stock funds.