These funds are suitable to:
- High Risk Investors
It is apt for investors with a high-risk appetite since all these funds are underperforming stocks but have the potential to grow over time. Since these funds are based on a possibility, they can be vulnerable and face fluctuations.
- Long Term Investors
It is best suited for investors who can invest for the long term. Since it is a fund that looks forward to the future, it is known to do well for those who remain invested for a long tenure.
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You will have to consider the following factors before you choose the best contra funds to invest in 2024:
- Tenure of the Investment: These funds are estimated to perform well in the future, which means you will have to be invested in this investment for the long term.
- Risks: Even the best contra funds come with a high volatility. It is known to see frequent price fluctuations. Therefore, do not panic when you see price fluctuations.
- Expense Ratio: The managing company will levy you with a certain amount of fees and charges to manage the fund effectively. You will have to be aware of these fees in order to estimate the correct returns you will make.
Here is a look at some advantages of investing in these top contra mutual funds –
- Unconventional investing – Instead of investing in common securities, contra mutual funds pick unconventional and underperforming assets. In the long run, such options have a much higher capacity of generating profits if external factors responsible for stopping a stock’s growth are resolved.
- Acts as hedge funds – These mutual fund instruments can hedge against market corrections during a phase when this market is in an overvalued condition. Even though best contra mutual funds pose a risk on their own, they can also reduce the risk faced by investors under specific conditions.
- Buy low and sell high – Since these stocks are underperforming while an investor buys them, they are priced on the lower end of the spectrum. With growth and realisation of its true potential, stock prices tend to increase, allowing investors to sell their assets when such prices reach their peak. This is how contra mutual funds promise immense returns to investors.
- Lower downside risk – Contra fund’s risk is still minimal when compared to the lower downside risk posed by other large-cap, small-cap, and mid-cap equity funds. This is because contra fund portfolios always trade at a discounted rate when compared to their past valuations.
These are just a few of the reasons why seasoned investors should take advantage of the best contra mutual funds.
The major risks associated with and to be considered while investing in the top contra funds category are:
- They are based on estimations: These funds are invested in already undervalued stocks and only based on the estimation that they would perform well in future.
- It is for expert investors: Investors new to the investing environment need more expertise to invest in these stocks; they are most suitable to expert investors skilled in research and analysis.
- It is based on the fund manager's expertise: The fund manager's expertise is used to make investment decisions. Investors may experience losses if the equities underperform the fund manager's predictions.
FAQs
Q1. What are contra mutual funds known for?
A contra mutual fund is an investment in stocks underperforming at the moment and is estimated to perform well in the future.
Q2. Who can invest in contra-mutual funds?
These funds are specially meant for expert investors with a high-risk appetite. Given that they invest in undervalued stocks, they can face frequent price fluctuations or not perform as expected.
Q3. How long do I need to stay invested in a contra fund?
You need to stay invested in a contra fund for at least five years to witness the fund perform well and realise the actual benefits.
Q4. Can I redeem a contra fund investment at any time?
Yes, you can withdraw funds from the contra fund at any time after deducting any relevant exit loads.
Q5. Are contra funds a safe investment?
Contra funds employ contrarian methods and, when properly calibrated, can reward investors with returns that outperform the market.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
