Introducing the SBI Contra Fund
Did you know a mutual fund category that has limited stocks that only a few investors heard of? Yes, Contra Mutual funds are one of them. These are unique stocks that follow a contrarian style of investing. This sets them apart from the regular equity investments.
But how do you choose the winners? It is very easy as the SBI Contra Fund has scored a lot of limelight.
Yes, this fund was introduced on the 14th of July 1999 and has given 17.84% annual growth returns since then. Well, this is just the tip of the iceberg.
In this article, you will see why this fund will add value to your current portfolio.
Overview of SBI Contra Fund
The SBI Contra Mutual Fund is an open-ended equity fund that generates long-term capital appreciation. It makes a profit via investments in stocks that are unfavoured by the market but are strong basis. Fund managers act on precautions seeking stocks that appear temporarily to be under-priced.
When investors invest in these companies stocks at such low prices they are in for a surprise once the stocks regain their ground and rise in value.
The main characteristics of SBI Contra Fund
Here are the key features of this fund:
- Investment Approach: The fund invests in domestic equities. These are divided by capitalization and industry sector. In this case, at least 65% of its assets are invested in equity and related products.
- Diversified Portfolio: The firms owned by the portfolio comprised nearly 90 stocks. It diversifies risk at the sector level.
- Expense Ratio: The current expenses of the fund show that its expense ratio is 1.59% and this is comparatively well within the category.
- Minimum Investment: Customers can invest a minimum of ₹5,000 lump sum or start a Systematic Investment Plan at ₹500.
- Exit Load: If the units are redeemed within one year there is an exit load of 1% to support long-term investment.
Performance Analysis of SBI Contra Fund
Here’s a simple breakdown of the performance metrics for the SBI Contra Fund:
1-Year Return: 48.08%
This means that if you had invested in the SBI Contra Mutual Fund one year ago, your investment would have grown by around 48%. For example, an investment of ₹10,000 a year ago would now be worth ₹14,808. This shows the fund has performed strongly over the past year, delivering impressive returns in a relatively short period.
3-Year CAGR: 31.27%
The CAGR (Compound Annual Growth Rate) for the last three years is about 31%. This means that if you had invested in the fund three years ago, your investment would have grown by an average of 31% each year. For instance, if you invested ₹10,000 three years ago, your investment would now be worth around ₹22,270, demonstrating steady growth over time.
5-Year CAGR: 25.03%
Over the last five years, the fund has delivered a CAGR of 25%, meaning your investment would have grown by 25% per year on average. For example, an investment of ₹10,000 made five years ago would now be worth around ₹30,517. This steady performance shows the fund’s potential to deliver strong long-term returns.
Since Launch: 19.76%
Since the fund was launched, it has delivered an average annual return of about 19.76%. This means that if you had invested in the SBI Contra Fund when it first started, your investment would have grown at an average rate of almost 20% each year. Over the long term, this is a very solid return, showing the fund’s strong historical performance.
In summary, these returns highlight the fund’s ability to generate significant growth. This makes it a potentially rewarding investment over both short and long terms.
Advantages of investing in SBI Contra Fund
The following are some merits of investing in this contra fund:
- Potential for High Returns: Some of the stocks are at the moment traded at a price that is lower compared to their actual value. Moreover, the stocks are likely to recover in the future if the fund invests in them.
- Active Management: The fund is managed by experienced managers. They always look at the market with a view of tweaking the portfolio to maximize emerging opportunities.
- Market Downturn Hedge: This means the fund will be able to do better in unhealthy market conditions. Like where growth stocks may be lower in value hence acting as a hedge.
- Long-Term Growth: The target group is the long-term investors who can drive the company’s growth. It strives to achieve its objectives in undervalued sectors.
- Sector Diversification: It invests in sectors like banking, IT, pharmaceutical, and consumer goods domains are part of the portfolio. Which also diversifies risk and ensures stability.
The Risks Attached to the SBI Contra Fund
Learn the risk of SBI Contra Fund in the below points:
- Market Volatility
The fund purchases stocks that are expected to generate lower returns than growth stocks. The prices of these shares may change frequently. It makes this type of equity fund highly volatile. - Extended Recovery Periods
The period of bouncing back takes years. Investors who plan to invest in undervalued stocks need to be patient. They must be prepared for the fact that they may not start earning in the immediate future. - Expense Ratio
While rate and expense are competitive, the expense ratio may lead to lower returns. That is if the funded business does not meet set expectations. - Risk of Underperformance
In funds, where the selected stocks do not recover as intended. The fund might stay in the red longer; thus, it will post low returns.
Conclusion
In short, every investor with an eye on high returns by going contrary to the market trend should consider investing in the SBI Contra Fund. Due to the favorable historical statistics, competent management, and diversified portfolio. The fund remains a useful instrument for the shareholders who invest in the long term.
You can choose to invest via SIP through any online website. This will give the required strength and balance the risk of your overall portfolio.
In planning for investment in the future year especially in 2024 and beyond.
It affords the investor a chance to get some of the most undervalued stocks out in the market while having checks on their overall risks. If you are focused on keeping things less complicated in your investment plan. Yet aimed for enormously high returns in the long run, then it would surely benefit from the existence of this fund in your financial plan.
