|
With
a view to safeguard the investment portfolio of investors,
mutual funds are coming up with new concepts. One such new
concept is called "contra fund". In order to book
profits, one has to select a stock which has yet to realize
its full potential. This is precisely what the contra funds
aim to do as they acquire stocks based on a "contrary"
approach.
Thanks
to the bull run there is heavy investment in the stock markets
by more and more retail investors, which is increasingly becoming
a risky business. Hence, most of these investors prefer going
through the mutual fund route.
There
is a possibility of some stocks getting overlooked by investors
due to short-term goals. Investors would be getting higher
returns if they invest in these underrated stocks, which give
good returns in the long-term. However, for this they need
to wait for a longer period. It was clearly evident from the
US market crashes. The research revealed that contra portfolio
gave an annual return of 19% over a period of time, while
winner's portfolio gave a negative return of 5%. In India,
a similar trend was observed in BSE 200 during 2000 and 2005.
The stock prices would increase when stock markets realize
the fundamentals. The investors would be investing in those
stocks that were not chased by others and would be able to
get the stocks at lower prices. |
