Introduction
The SBI Contra Mutual Fund is poised to enhance your portfolio returns in 2024 with its unique investment strategy and proven track record. This detailed review delves into the fund’s consistent outperformance, contrarian approach to identifying undervalued stocks, and diversified portfolio.
Managed by an experienced team at SBI Mutual Fund, the SBI Contra Fund stands out for its prudent risk management and suitability for long-term investors.
Learn why this fund is an excellent choice for those seeking substantial growth and long-term capital appreciation.
Detailed Review of SBI Contra Fund
Here is a complete analysis of this fund’s performance and its investing approach:
After being launched on 14th July 1999 as an Equity category scheme which is based on a contrarian investment style. This scheme has generated 17.72% returns since its inception while managing an impressive AUM of Rs.30520 Crores as of 31.05.24. Let’s study in depth its performance track record:
1. Consistent Outperformance: A Proven Track Record
The SBI Contra Mutual Fund has a history of delivering impressive returns, consistently outperforming both its peers and the broader market. Over the past decade, it has achieved annualized returns of 25%, significantly surpassing the small-cap fund category average of 20.03%. This strong performance underscores the fund’s robust investment strategy and skilled management, making it a standout choice for investors seeking long-term growth.
2. Contrarian Approach: Identifying Undervalued Gems
The SBI Contra MF employs a contrarian investment style, which focuses on identifying stocks that are trading below their intrinsic value. This approach involves buying undervalued stocks that the broader market may have overlooked, with the expectation that their true value will eventually be recognized. By taking a long-term view and investing in these undervalued gems, the fund has been able to generate market-beating returns. This strategy leverages thorough research and analysis to uncover opportunities that others might miss, providing a distinct advantage in the small-cap space.
3. Diversified Portfolio: Mitigating Risks
Diversification is a key component of the SBI Contra Mutual Fund’s strategy. The fund invests in 40-50 stocks across various sectors, which helps to mitigate company-specific risks and provides exposure to a broad range of small-cap opportunities. As of December 2023, some of the top holdings include Blue Star Ltd. (4.21%), Kalpataru Power Transmission Ltd. (3.97%), and Finolex Industries Ltd. (3.25%). This diversified approach ensures that the fund is not overly reliant on any single investment, enhancing its stability and potential for steady returns.
4. Experienced Management: Prudent Risk Management
The SBI Contra Fund is managed by an experienced team at SBI Mutual Fund, one of India’s largest and most reputable asset management companies. The management team follows a disciplined investment process and employs prudent risk management strategies to navigate the inherent volatility of the small-cap space. Their expertise in identifying promising small-cap stocks and commitment to strong research of the fund’s strong performance, provide investors with confidence in their investment decisions.
Suitability of SBI Contra Fund for Long-Term Investors
- Small-cap funds like the SBI Contra Scheme are ideally suited for investors with a long-term investment horizon of at least 7-10 years.
- This extended timeframe allows investors to benefit from the higher growth potential of small-cap companies while weathering short-term market fluctuations.
- The fund’s consistent outperformance and contrarian approach can help long-term investors achieve their financial goals by capitalizing on undervalued opportunities that have substantial growth potential.
Detailed Analysis of SBI Contra Fund Key Features
The following pointers show a strong performance while giving insights into its sector allocation. Read more:
1. Performance Review
The SBI Contra MF’s performance metrics are noteworthy, reflecting its ability to deliver strong returns while managing risk effectively. The fund’s standard deviation, a measure of volatility, is lower than many other small-cap funds, indicating more stable performance. This balance between high returns and controlled risk makes the SBI Contra Stock a prudent choice for risk-aware investors.
2. Sector Allocation
The fund’s sector allocation strategy is designed to capitalize on growth opportunities across various industries. By diversifying its investments across multiple sectors, the fund reduces its exposure to sector-specific risks. This approach also allows the fund to tap into the growth potential of different areas of the economy, enhancing its overall return potential.
3. Stock Selection
The stock selection process for the SBI Contra Mutual Fund involves rigorous analysis and research. The fund managers focus on identifying fundamentally strong companies with robust growth potential. By investing in undervalued companies relative to their intrinsic value, the fund aims to generate superior returns over the long term. This disciplined approach to stock selection is a key factor in the fund’s consistent outperformance.
Taxation Implications on SBI Contra Fund
Two types of taxes are applied to this fund, which are as follows:
1. Short-Term Capital Gains (STCG)
If investments in the SBI Contra MF are redeemed within one year, the returns are subject to a short-term capital gains tax of 15%. This tax applies to the gains made on the investment during the short-term holding period.
2. Long-Term Capital Gains (LTCG)
For investments held for more than one year, the long-term capital gains are taxed at 10%, provided the total long-term capital gains exceed ₹1 lakh in a financial year. This favourable tax rate makes long-term investing in the SBI Contra Fund more attractive, as it allows investors to maximize their post-tax returns.
How to Invest in SBI Contra Fund?
Here is a systematic way for you to start investing in this contra fund:
The minimum investment for the SBI Contra Mutual Fund is ₹500 for both lump sum investments and systematic investment plans. This low entry barrier makes the fund accessible to a wide range of investors, including those who are just starting their investment journey.
Conclusion
Invest now with a simple SIP plan to boost your overall portfolio. Its proven track record, diversified portfolio, experienced management, and effective volatility protection make it a compelling addition to any well-diversified investment portfolio.
However, potential investors should carefully assess their risk tolerance and investment goals before committing to this high-risk, high-reward fund.
