SEBI has come up with 36 categories of mutual funds to make investing easier for retail investors. The contra fund category is one of them.

The system that SEBI has now evolved has 36 categories of mutual funds.

The SEBI circular aims to ensure that schemes named differently are clearly distinct in aspects like asset allocation, investment strategy etc.

Now, let’s have a look at the best mutual funds in the contra category.

Best Contra Category Funds – 2018

1.Invesco India Contra Fund

This is one of the most popular funds in the contra category. It is a fund with moderately high risk and has given a return of 21.46% since its launch.

Returns Per Annum of Invesco India Contra Fund:

Duration Returns
1 year 18.0%
3 years 16.3%
5 years 28.3%
Since launch 21.46%

Key Information 

Launch Date 01 January 2013
NAV (26 July 2018) ₹51.8
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹919 Cr
Riskometer Moderately High
Minimum SIP ₹500
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark S&P BSE 500 TRI since its launch.
Age of the fund 5 years old
Expense Ratio 1.00%
Exit Load If redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Investment Objective The investment objective of the scheme is to generate capital appreciation through investment in equity and equity related instruments.

The scheme will seek to generate capital appreciation through means of contrarian investing.

2.Kotak Classic Contra

It is a fund with high risk, but has given a return of 16.47% since its launch.

Returns Per Annum of Kotak Classic Contra:

Duration Returns
1 year 17.1%
3 years 14.2%
5 years 19.3%
Since launch 16.47%

Key Information :

Launch Date 01 January 2013
NAV (26 July 2018) ₹55.1
Plan Type Direct
Rating by Groww 3 Star
AUM (Fund Size) ₹140 Cr
Riskometer High
Minimum SIP ₹1,000
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark NIFTY 100 TRI since its launch.
Age of the fund 5 years old
Expense Ratio 1.52%
Exit Load If redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Investment Objective The scheme aims to generate capital appreciation from a diversified portfolio of equity and equity related instruments. It will invest in stocks of companies, which are fundamentally sound but are undervalued.

What Is Contra Fund?

As the name suggests, these funds take a contrarian view on equities.

The fund manager picks underperforming stocks or sectors, which are likely to perform well in the long run, at cheap a valuation.

Mutual funds under the new SEBI circular will be permitted to offer either value or contra fund.

Key Details

Scheme type Equity scheme
Definition An equity mutual fund following a contrarian investment strategy
Asset allocation Minimum investment in equity & equity related instruments is 65% of total assets

What Is the Investment Style of Contra Funds?

Contrary to perception, investing in contrarian funds does not involve an overly complex strategy. Yet, they are consistently overlooked by investors. To understand why, one must first understand the philosophy behind contrarian investing.

It involves buying into companies that are being rejected by investors because of short-term concerns. Since these stocks are out of favor, one can buy them cheap and it is estimated that they will benefit in the long-term.

Therefore, the reward-risk balance is quite attractive for investors.

Financial planners suggest that individuals should look at this category as a diversification opportunity, that is, only after they have invested a significant portion of their mutual fund portfolio in large-cap, equity diversified funds.

Even then, invest only 10-15% of your portfolio in these funds and not more.

Remember, these funds invest in ‘out-of-flavor’ themes and, hence, may not perform well in the short-term.

Therefore, only those with an investment horizon of about 5 years can consider this option.

Things to Remember About Investing

There are a lot of factors you should look into before selecting a mutual fund scheme which will match your investment goal.

Mutual fund investors in India may disagree on strategies and fund choices but one of the few things that most would agree on is the fact that investing for the long-term is an ideal method to maximize potential gains.

Hence, analyze your goals and risk appetite and invest accordingly.

Investing in mutual funds online is very simple and paperless. Simply log in to your Groww account, choose a fund, and invest using net banking – exactly like you would when shopping online!

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww