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Business News/ Mutual Funds / An investment of 1 lakh in this mutual fund at the time of launch would have grown to 82.6 lakh
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An investment of ₹1 lakh in this mutual fund at the time of launch would have grown to ₹82.6 lakh

If you invested ₹one lakh in SBI Contra Fund, the investment would have grown to ₹1.45 lakh in one year. In three years, an investment of ₹one lakh would have swelled to ₹2.35 lakh.

SBI Contra Fund has delivered an annualised return of 19.66 per cent since its inception Premium
SBI Contra Fund has delivered an annualised return of 19.66 per cent since its inception

The power of compounding is so profound that it is even referred to as magic. It is lauded by all and sundry. The doyens like Warren Buffett credit compounding as one of the key reasons for their wealth generation.

The great German scientist Albert Einstein called compounding as the ‘eighth wonder’.

Here, we zero in one mutual fund scheme i.e., SBI Contra Fund and study its returns over a period of time to understand how compounding played a key role in its growth.

At the outset, let us first understand what exactly are contra mutual funds.

Contra mutual funds

Contra mutual funds refer to the schemes that follow contrarian investment strategy with a minimum of 65 percent in equity.

Under this strategy, underperforming stocks and sectors are picked at low price points with a view that they will perform in the long run. The portfolios of contra funds have defensive and beaten down stocks that have given negative returns during bear markets.

As per the SEBI guidelines, a mutual fund house can either offer a Contra mutual Fund or a Value Fund, but not both.

Investing 1 lakh

A humble investment of one lakh in SBI Contra Fund scheme can grow substantially over a period of time. We show it here as follows:

If you invested one lakh in SBI Contra Fund, the investment would have grown to 1.45 lakh in one year. In three years, an investment of one lakh would have swelled to 2.35 lakh. At the same time, if someone had invested one lakh five years ago, the sum would have grown to 3.17.

Time                           Investment of one lakh (Rs) CAGR return (%)
1 year                                                           1.45 lakh45.09
3 years                                                           2.35 lakh32.92
5 years                                                         3.17 lakh25.94
Inception                                              82.61 lakh19.66

(Source: sbimf.com)

Therefore, if the investment of one lakh happened at the time of launch, it would have grown to 82.61 lakh, reveals the table above.

About the scheme

The scheme was launched on July 5, 1999 and its assets under management (AUM) stood at 23,613 crore. The key portfolio constituents are T-Bill, HDFC Bank, GAIL, SBI, Cognizant Technology Solutions, cash & cash equivalents.

Sector wise, the maximum allocation is made to financial services (20.17%), oil, gas & consumable fuels (10%), information technology (7.76%), sovereign (7.51%), healthcare (6.65%) and automobile & auto components (5.98%).

The scheme's fund managers are Dinesh Balachandran and Pradeep Kesavan.

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Published: 07 Feb 2024, 10:21 AM IST
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