Investing contrarianically is buying cheap stocks others have missed, going against the grain. This strategy is the focus of contra funds such as the SBI Contra Fund.
SBI Contra Fund is a solid alternative to conventional investment techniques because of its skilled management, systematic approach, and steady performance over market cycles. Regardless of your experience level, consider how investing in contra funds can help you diversify and expand your portfolio.
What is the SBI Contra Fund?
The SBI Contra Fund is an investment vehicle that invests in inexpensive equities relative to their intrinsic value to generate long-term capital growth. SBI Funds Management Pvt. Ltd manages it. The fund makes investments in stocks that the market still needs to give more credit to have room to grow in value. The goal of this unconventional strategy is to capitalise on market imperfections.
Benefits of Contrarian Investing
Investing contrarian means defying the market’s sentiment. This strategy has various advantages.
- It promotes independent thought, guiding investors away from a vibrant herd mentality. By rigorously evaluating facts, contrarians can spot opportunities others would pass up due to market pessimism.
- They also avoid overvalued equities prone to overhype, lowering the possibility of losing money during market falls.
- Long-term returns from contrarian strategies are frequently higher because undervalued assets have a higher chance of appreciating when market sentiment changes.
- Contrarians also see less volatility while investing against the herd than mainstream investors since they are less vulnerable to bubbles and panic in the market.
- Contrarian investing promotes a systematic and analytical approach, yielding higher returns while lowering adverse risk.
Advantages of SBI Contra Fund
The SBI Contra Fund provides investors with several benefits.
- The fund can make wise investment choices since it is run by a team of seasoned experts who follow a rigid procedure.
- The fund offers the advantages of risk management and diversification while reducing the portfolio’s overall risk by investing in a mix of expensive and inexpensive stocks.
- The fund has consistently produced strong returns throughout market cycles, demonstrating its capacity to handle various market conditions.
Due to these benefits, investors looking for a contrarian strategy may find the SBI Contra Fund a compelling investment choice.
Performance Analysis: SBI Contra Fund
Here is the fund’s performance over various periods:
Year Fund
1 year 51.46% 50.23%
3 years 31.87% 26.28%
5 years 26.35% 22.46%
Examination of the fund’s performance in various market circumstances:
- Bull Markets: Over three years, the fund’s Compound Annual Growth Rate (CAGR) of 29.44% has demonstrated its ability to profit from market upswings, exhibiting exceptional performance in bull markets.
- Bear Markets: The fund’s value-oriented investment strategy looks for cheap companies during gloomy times. This may result in gains later but sets it up for a possible recovery once markets stabilise.
- Volatility: With a standard deviation of 11.88% over three years, the fund’s ‘Very large’ risk rating indicates that, although it can yield significant returns, it is also associated with considerable volatility.
Case Study: SBI Contra Fund’s Investment Strategy
The HDFC Bank investment by SBI Contra Fund exemplifies the fund’s contra-investment approach. Investing in stocks presently undervalued or out of favour with the market but have the potential for long-term growth or a turnaround is known as contra-investing.
Even if HDFC Bank has a solid foundation, it might have had brief setbacks or market pessimism, which makes it a tempting alternative investment possibility.
Conclusion
The SBI Contra Fund is an example of contrarian investing. This strategy takes advantage of market inefficiencies to buy cheap equities that are about to rise in value. The fund’s strong performance highlights its potential for significant returns, especially in long-term scenarios.
Because of its clever placement, investors can profit from market corrections, making it an appealing option for value-focused diversifiers looking to increase their holdings.
Given its performance history, the SBI Contra Fund is a respectable complement to a well-rounded investing portfolio, providing a healthy mix of opportunity and risk in the ever-changing world of equity investments.
