What is Contra Fund?

Investors choose different investment strategies based on their goals and risk appetite. One such strategy is investing in contra mutual funds, which follow a contrarian approach. These funds differ from traditional stock investments. Let us get a complete understanding of what is contra fund?’, a list of contra mutual funds, features of mutual funds, benefits of mutual funds, and more. 

What are Contra Mutual Funds? 

A contra mutual fund goes against the current market trends by buying stocks that are not performing well. With a contrarian approach, the fund manager invests in stocks that investors overlook even during high demand.

How Does a Contra Mutual Fund Work? 

Here are a few of the pointers to understand the working of a contra mutual fund: 

• Fund managers conduct thorough research to find companies with strong fundamentals but are facing negative market sentiments. 
• Once the companies are identified, it then purchases these stocks.
• Fund managers follow a long-term strategy and hold the investments until they recognize actual value. 

Features of Contra Mutual Funds

Here are the features of contra mutual funds:

• Strategy: Contra Mutual Funds invest in undervalued stocks with future growth potential.
• Volatility: Contra Mutual Funds are more volatile than traditional mutual funds.
• Long-Term Investment: Contra Mutual Funds is for investors with more than a 5-year investment plan.  

How to invest in Contra Funds? 

Follow the below steps to invest in contra funds: 

• Step 1: Visit the mutual fund website/app.
• Step 2: Complete the registration process.
• Step 3: Select your preferred contra mutual fund.
• Step 4: Click on the ‘Invest’ option and select the amount.
• Step 5: Select SIP or lump sum investment.
• Step 6: Enter your KYC information

Who should invest in Contra Mutual Funds? 

If you fall under the below category of investors, you can consider investing in contra mutual funds:

• Investors who want to reduce risk in an overvalued market. 
• Investors willing to stay invested until stocks reach their expected value. 
• Investors who want to invest for a long-term minimum of 5-7 years.

Taxation Rules of Contra Mutual Funds 

Contra mutual funds are taxed as mentioned below: 

Capital Gain Taxation 

Dividend Taxation