Contra Funds

Contra funds are a unique type of mutual fund. They aim to beat market trends by betting against the prevailing market trends. They invest in assets that are underperforming or depressed at the time to achieve potentially higher returns.

Best Contra Funds Sorted by Last 3 Year Returns

About Contra Funds

Contra mutual funds are a type of equity fund that follow a contrarian investment strategy. These funds invest in stocks that are currently underperforming or undervalued but have the potential to perform well in the long run. The idea is to buy low and sell high — taking positions that are opposite to prevailing market sentiments. This approach often goes against popular market trends, hence the name "contra" (meaning opposite).

The fund manager of a contra fund identifies sectors or stocks that are temporarily out of favor due to short-term concerns but show long-term growth potential. These investments are made with the belief that the market will eventually recognize their true value, leading to significant gains.

How Do Contra Funds Work?

Contra funds invest at least 65% of their assets in equities and equity-related instruments, primarily in stocks that the fund manager believes are undervalued or overlooked. These could be stocks of companies facing temporary issues, or sectors that are currently underperforming but are expected to bounce back in the future. The success of contra funds heavily relies on the fund manager's expertise in identifying such opportunities and having the patience to hold investments until the market corrects its valuation.

Key Features of Contra Funds

• Contrarian Approach: Invests against prevailing market trends.
• Long-Term Focus: Best suited for investors with a high risk appetite and a long investment horizon.
• Diversification: Offers a diversified portfolio of undervalued stocks across different sectors.
• High Risk, High Reward: Can offer high returns if the market corrects itself in favor of the invested stocks.

Contra funds are ideal for experienced investors who are comfortable with market volatility and have a long-term perspective. These funds offer an opportunity to capitalize on market inefficiencies and benefit from the potential rebound of overlooked stocks.