SBI Contra MF Scheme: The first contrarian mutual fund scheme in India, SBI Contra MF Scheme, is commemorating 25 years of growth. Since its July 1999 launch, the fund has routinely produced returns higher than the BSE 500 TRI, its benchmark index. Since its launch on July 5, 1999, the plan has produced a 19.99% return compared to a 16.12% return on its benchmark, the BSE 500 TRI.
Consider spending one lakh rupees on your child’s education in 1999. That figure would have increased significantly to a substantial Rs 95.3 lakh today (as of June 28, 2024) with the fund’s gains, a far more comfortable amount for their future studies. Since launch, individuals who choose to contribute monthly (SIP) at a rate of Rs 10,000 have amassed an astounding Rs 7.19 crore. That demonstrates the effectiveness of compounding!
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What are Contra Funds?
Contra funds invest in undervalued or out-of-favor companies, taking a calculated risk. Unlike most funds that focus on trending and popular securities, contra funds look for opportunities in stocks that the market currently overlooks or undervalues.
Systematic Investment Plan (SIP)
Planning for retirement might seem daunting, but starting early with a Systematic Investment Plan (SIP) can make a significant difference. Even small monthly investments, when made consistently over a long period, can grow into a substantial retirement fund.
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According to Business Standard, with more than 20.5 lakh active folios as of June’s end, SBI Contra Fund had an AUM of Rs 34,366 crore. Over the past three years, the fund has generated returns of 29.64%.
Contra funds focus on undervalued or out-of-favor companies, taking a measured risk in contrast to most funds that invest in hot and trending securities. The justification for this is that stock prices of businesses that the market as a whole perceives negatively may experience a decline in value.
These funds believe that the company’s fundamentals are good and that its stock price will eventually rise, therefore, they view this as an opportunity to purchase low. Imagine that a new competitor has just joined the market, and everyone is selling the same brand of shoes. A counter-fund manager may think this is over reactionary and that there is still value in the well-known brand. They could buy stock in that company, hoping that after the initial panic wears off, its price will rise.
