Contra Funds: Meaning and Popular Contra Funds in Market

Various investment styles are employed by mutual fund managers in order to reach the objectives of the scheme. One such investment style is contrarian investing. In a contrarian investment style, fund managers invest in stocks with opposing market views, as indicated by the name.

If you are new to investing or interested in learning more about contra mutual funds, you are in the right place. In this blog post, we will delve into the various facets of contra funds.

What are Contra Funds?

Contra funds are a category of mutual funds that follow a contrarian investment strategy. These funds invest against the market trend by purchasing stocks that are underperforming in the current market scenario. The fund manager has a different opinion on stocks that are either unpopular or in high demand.

In either situation, whether the stocks are performing below or above expectations, their value becomes skewed, prompting fund managers of contra funds to capitalize on the opportunity.

The main concept behind contra funds is that any abnormal pricing of the asset will eventually return to normal once the current triggers are resolved.

The operation of contra funds is distinct and unlike other mutual funds. Investing in these funds is based on the belief that the stocks will grow in the future. Contra fund managers purchase these stocks at a cheap price and secure a favorable deal.

Stocks are invested in with a focus on their potential for long-term growth. Therefore, if you have immediate goals or desire fast profits, you should steer clear of investing in contra funds.

Benefits of Investing in Contra Funds

Let’s look into the benefits of investing in contra funds:

1. Opportunity for Competitive Returns:

By investing in contra stocks, contra funds have the potential to deliver attractive returns when these stocks recover and their true value is recognized by the market.

2. Diversification:

Contra funds often invest in a range of sectors and stocks that are not currently popular. This diversification helps reduce the risk associated with investing in a single asset or sector, providing a buffer against market volatility and sector-specific downturns.

3. Long-Term Growth Potential:

Contra funds are designed with a long-term investment horizon in mind. This approach allows investors to benefit from the recovery of contra stocks over time, potentially leading to significant capital appreciation.

Popular Contra Funds in the Market

Several contra funds have made a mark in the investment world with their consistent performance and adherence to contrarian strategies. Here are a few best contra funds to invest in 2024:

Final Words

Contra funds offer a unique investment approach that appeals to investors with a long-term perspective and a willingness to embrace market inefficiencies. Contra funds aim to deliver substantial returns when these investments recover and realize their true value. Whether you are a seasoned investor or new to the world of mutual funds, understanding the nature of contra funds and the opportunities can help you build a diverse portfolio.