What is SBI Contra Fund 2022 and For which we use it?
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| What is SBI Contra Fund? |
SBI Contra Fund is a mutual fund that invests in a portfolio of stocks, bonds and money market instruments. It has a minimum investment of Rs. 50,000 and an expense ratio of 1.49%.
Contra fund
A contra fund is a mutual fund that takes a contrarian view of the markets, investing in companies that are out of favor with the majority of investors.
Contrarian investing is based on the belief that the collective wisdom of the markets is often wrong, and that by going against the grain, investors can find opportunities for profitable investments.
There are many different ways to measure market sentiment, but one popular method is to look at the ratio of stocks that are trading above their 200-day moving average to those that are trading below it. When this ratio is high, it means that there are more stocks in an uptrend than there are in a downtrend, and vice versa.
The thinking behind contra investing is that when this ratio gets too high or too low, it can be a signal that the market is due for a reversal. For example, if there are more stocks in an uptrend than there are in a downtrend, it could be a sign that the market is overbought and due for a pullback. Similarly, if there are more stocks in a downtrend than an uptrend, it could be a sign that the market is oversold and due for a rally.
How to use the contra fund?
If you are looking to invest in a contra fund, there are a few things you should know about how they work. A contra fund is a mutual fund that bets against the market. That means that when the market goes up, the fund goes down, and vice versa.
The reason people invest in contra funds is because they can provide good returns in a down market. Before investing, however, you must be informed of the hazards involved. Contra funds are not for everyone, and you should only invest if you are comfortable with the risks.
Mechanism of the Contra Fund
An equity contra fund is one where the fund manager takes positions opposite to the markets. So, when the markets are going up, the fund manager will take short positions or bet against the market, and when the markets are going down, the fund manager will take long positions. The aim is to make money regardless of which direction the markets are moving.
There are two main ways in which a contra fund can make money. The first is by taking advantage of market movements. For example, if the markets are going up, the fund manager will short sell stocks that are likely to fall in value. If the markets are going down, the fund manager will buy stocks that are likely to rise in value.
The second way in which a contra fund can make money is by using financial engineering techniques. For example, the fund manager might use derivatives to hedge his positions or to take advantage of market movements.
Contra funds are usually used by investors who are looking for high returns and are willing to take higher risks. However, these funds can also be suitable for investors who want to protect their portfolio from market volatility.
Types of the Contra Fund
SBI Contra Fund is a type of mutual fund that is used for investing in equity instruments. The main objective of this fund is to generate capital appreciation by investing in companies which are undervalued in the market. This fund is suitable for investors with a high risk appetite and a long-term investment horizon.
There are two types of Contra Funds:
1) Growth Oriented Contra Fund: These funds invest in companies which have the potential to grow at a faster rate than the overall market.
2) Value Oriented Contra Fund: These funds invest in companies which are undervalued by the market and have the potential to generate high returns.
Advantages and Disadvantages of the Contra Fund
The SBI Contra Fund is a mutual fund that invests in stocks that are considered to be undervalued by the market. SBI Funds Management Pvt. Ltd. manages the fund, and was launched in December 2006. The objective of the fund is to provide capital appreciation by investing in stocks that are trading at a discount to their intrinsic value.
The contra fund follows a value investing strategy, and invests in companies across all sectors. The fund has a diversified portfolio, with investments in large-cap, mid-cap, and small-cap stocks. As of March 2020, the top holdings of the fund included Hindustan Unilever, HDFC Bank, Housing Development Finance Corporation, and Bajaj Finance.
The Contra Fund has outperformed its benchmark index, the Nifty 500, since its inception. For the period from December 2006 to March 2020, the fund had an annualized return of 16.62%, while the Nifty 500 returned 11.73%. However, it is important to note that past performance is not indicative of future returns.
The Contra Fund is suitable for investors with a high risk appetite who are looking for long-term capital appreciation. Investors should bear in mind that
Conclusion
The SBI Contra Fund is a mutual fund that is best suited for investors with a high risk tolerance. The fund invests in stocks that are considered to be undervalued by the market, which can provide investors with the potential for high returns.
However, it is important to remember that these investments are also more volatile, which means that there is a greater chance of losses as well. If you are considering investing in the SBI Contra Fund, make sure to do your research and speak with a financial advisor to ensure it is the right choice for you.
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