Putting money into mutual funds can be a terrific method to accumulate wealth over time. One fund that many investors may want to consider is the SBI Contra Fund. This equity-oriented hybrid fund has several benefits that make it an attractive investment option.
Advantages of SBI Contra Fund
Here are some of the key advantages of investing in the SBI Contra Fund:
Diversification
The SBI Contra Fund invests across sectors and market capitalizations to create a diversified portfolio of stocks. This diversification helps reduce the risk of the fund compared to investing in just a few stocks or sectors. The fund typically holds between 50-75 stocks spread across market caps and sectors. This wide range of holdings means the fund is less vulnerable to downturns in any one area of the market.
Flexibility in investment approach
The SBI Contra Fund follows a contrarian investment strategy. This means the fund managers intentionally go against market sentiment and buy stocks that are currently out of favour. This flexible approach allows the fund managers to take advantage of valuation opportunities in the market. The fund buys undervalued stocks with strong growth potential. This contrarian style can help the fund outperform in certain market conditions.
Focus on quality stocks.
While following a contrarian approach, the SBI Contra Fund still focuses on quality companies with strong financials and competitive advantages. The fund managers emphasize stock selection and invest in companies with sound management and prospects for long-term growth. This focus on quality helps ensure investments are made in fundamentally strong businesses.
Potential for long-term capital appreciation
With its contrarian approach and focus on undervalued stocks, the SBI Contra Fund aims to provide long-term capital appreciation. It has the flexibility to take relatively higher exposure to equities, which can help boost returns over long periods. The fund has delivered an annualized return of around 18% over the last 10 years, demonstrating its potential for wealth creation.
Low expenses
The SBI Contra Fund has relatively low expense ratios, especially compared to most other actively managed equity funds. This helps more of your money stay invested and minimize costs. The direct plan has an expense ratio of just 0.92%. Low costs allow for higher compounding over time.
Conclusion
In addition to the SBI Contra Fund, SBI Mutual Fund also offers the SBI Equity Hybrid Fund as another option for equity-oriented returns. The SBI Equity Hybrid Fund invests 65-80% in equities and the balance in debt and money market instruments. It follows a multi-cap strategy when picking stocks across market caps and sectors. With both growth and income characteristics, the SBI Equity Hybrid Fund can provide a balanced way to participate in the upside of equities while lowering risk through debt allocation. For investors seeking equity exposure with slightly lower risk than a pure equity fund, the SBI Equity Hybrid Fund is another potential choice to consider.
The SBI Contra Fund provides an actively managed, diversified equity investment focused on long-term growth. For investors looking to put their money to work in the stock market, it is one of the top choices to consider from leading mutual fund house SBI Mutual Fund. When exploring investment options, be sure to evaluate your risk tolerance and time horizon. Reach out to a trusted financial advisor like 5paisa to determine if the SBI Contra Fund may be a fit for your portfolio. With its contrarian approach and experienced management, it could potentially boost your equity returns over time.
