Contra Funds: Are You Buying Cheap or Buying Wrong?

Bandhan MF is launching a contra fund — a type of mutual fund that bets on unloved, undervalued stocks. These funds can deliver big returns, but only if you understand how they work and how long to stay invested.

Here's what happened: Bandhan Mutual Fund is launching a contra fund, joining a small but distinct SEBI-recognised category that uses a contrarian investment strategy.. Contra funds are required to invest a minimum of 65% of assets in equities, focusing specifically on stocks the broader market currently undervalues or ignores.. The category has only a handful of funds in India, with some long-running contra schemes delivering strong long-term returns despite periods of sharp underperformance..

What you should do: Compare existing contra funds' 5-year and 10-year rolling returns on platforms like MF Central or Value Research before committing to any new NFO.. Avoid investing your emergency fund or any money you may need within 3 years — contra funds can stay in the red for extended periods before the thesis plays out.. Limit contra fund exposure to 10-15% of your total equity portfolio and continue your core SIP in a diversified or index fund alongside it..

NFOs have zero track record — if you like the contra strategy, consider an existing fund with a 7-10 year history first; you can always switch later.