Financial Awareness Level
What Are Contra Mutual fund schemes?
Contra mutual fund schemes are a category of equity schemes that follows a contrarian investment strategy. These schemes invest in stocks that are currently underperforming or out of favor but may have strong long-term potential. The fund manager identifies undervalued stocks and waits for their value to rise as market conditions improve.
How Do Contra Mutual fund schemes Work?
- Fund managers identify fundamentally strong stocks that are currently undervalued.
- Investments are made in sectors or companies that are underperforming but may have recovery potential.
- As market sentiment shifts, these stocks may generate significant returns.
Key Features of Contra Mutual fund schemes
- Contrarian Approach: Invests in stocks that are ignored by the market but have strong fundamentals.
- Long-Term Focus: Requires patience as undervalued stocks take time to recover.
- Higher Risk-Reward Ratio: Can deliver better returns but may take time to perform.
- Diversification: Spreads investments across sectors that are temporarily out of favor.
Benefits of Investing in Contra Mutual fund schemes
- Potential for High Returns: Buying low and selling high can generate significant gains.
- Diversification: Invests in multiple sectors to minimize risk.
- Capitalizing on Market Cycles: Invests in sectors before they regain investor confidence.
- Professional Management: Expert fund managers analyze market trends to identify opportunities.
Who Should Invest in Contra Mutual fund schemes?
- High-Risk Investors: Suitable for those willing to invest in out-of-favor stocks.
- Long-Term Investors: Best for individuals with an investment horizon of 5-10 years as per your risk appetite .(You are recommended to seek advice from financial advisor before you take any/refrain from any action)
- Experienced Investors: Those who understand market cycles and contrarian strategies.
Risks Associated with Contra Mutual fund schemes
- Extended Recovery Time: Stocks may take longer to perform.
- Higher Market Volatility: Investments are made in sectors with negative sentiment.
- Fund Manager Dependency: Success depends on the manager’s ability to identify the right stocks.
How to Invest in Contra Mutual fund schemes?
- Choose a scheme based on past performance, expense ratio, and fund manager expertise.
- Invest through mutual fund platforms, banks, or financial advisors.
- Opt for a Systematic Investment Plan (SIP) or lump sum investment.
- Monitor and review scheme performance periodically.
Contra mutual fund schemes are ideal for investors who believe in a contrarian approach and are willing to wait for market corrections. Evaluating the schemes strategy, market conditions, and risk factors can help investors make informed decisions.
Additional links
What is a Mutual Fund? - Beginner's Guide to Investing
AMFI - Introduction to Mutual Funds
FAQ Section
Are contra mutual fund schemes suitable for short-term investments?
No, these schemes require a long-term horizon as stocks take time to recover. (You are recommended to seek advice from financial advisor before you take any/refrain from any action)
How are contra schemes different from value schemes?
Contra schemes invest in underperforming sectors, while value schemes invest in fundamentally strong but undervalued stocks. (You are recommended to seek advice from financial advisor before you take any/refrain from any action)
What is the ideal investment period for contra schemes?
At least 5-10 years to benefit from market cycles as per your risk appetite and financial goals.(You are recommended to seek advice from financial advisor before you take any/refrain from any action)
Can contra schemes outperform other equity schemes?
Yes, during market recoveries, these schemes can generate significant returns.
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Visit https://www.hdfcfund.com/information/key-know-how to know more about the process to complete a one-time Know Your Customer (KYC) requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website (www.sebi.gov.in/intermediaries.html). For any queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations Officers. Additionally, investors may also lodge complaints directly with the AMCs. If they are not satisfied with the resolutions given by AMCs, they may raise complaint through the SCORES portal on https://scores.sebi.gov.in/scores-home/. SCORES portal facilitates investors to lodge complaint online with SEBI and subsequently view its status. In case the investor is not satisfied with the resolution of the complaints raised directly with the AMCs or through the SCORES portal, they may file any complaint on the Smart ODR on https://smartodr.in/login.
The information is for general purposes only and not an investment advice. Readers should seek professional advice before taking any investment related decisions.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY
