Oftentimes, investment experts urge us that regular investment in mutual funds can help us achieve long term financial goals with ease. Some of their claims and assurances are convincing but might appear too good to be true.
So, what is the way out? Well, the more credible and empirical way to evaluate a scheme’s growth potential is to assess its past returns in order to gauge the return you could have earned as an investor.
Well, it might lead to some feeling of FOMO (fear of missing out), but on a positive note — you could take it as a lesson to learn, and thereby start investing into any of the schemes which fill a gap in your mutual fund portfolio.
So, without much ado we put a spotlight on SBI Contra Fund to examine the returns it has delivered in the past few years.
Let us suppose, someone had invested ₹one lakh in this scheme at the time of launch, how much it would have grown in the past few years. But before that, let us understand what does the category of contra funds refer to?
These are equity mutual funds which follow contrarian investment strategy with at least 65 percent in stocks, as per the Sebi’s categorisation of mutual fund schemes.
As one can check in the table below, an investment made one year ago in SBI contra fund would have grown to ₹1.47 lakh since the scheme has grown by 47 percent in the past 12 months.
In the last 3 years, the scheme has given a return of 29.72 percent. This means if someone had invested ₹one lakh three years ago, it would have grown to ₹2.18 lakh.
Likewise, the investment of ₹one lakh would have swelled to ₹3.02 lakh in five years by growing at a compounded rate of 24.69 percent.
In a span of 10 years, the investment of ₹one lakh would have grown to ₹5.65 lakh by growing at an annualised return of 18.91 percent.
| Tenure | Return (%) | Amount grows to (Rs) |
| 1 | 47.76% | 1.47 lakh |
| 3 | 29.72% | 2.18 lakh |
| 5 | 24.69% | 3.02 lakh |
| 10 | 18.91% | 5.65 lakh |
| Since Inception | 19.64% | 84.75 lakh |
(Source: sbimf.com, AMFI)
Similarly, if the investment was made right at the time of scheme’s launch, the investment would have given a CAGR return of 19.64 percent, thus growing to ₹84.75 lakh.
ALSO READ: 10 essential tips every retail investor should know for financial success
However, it is vital to point out here that the historical returns are meant to be seen as indicative and not as testimony to a scheme’s future potential.
All equity mutual funds, just like stocks, are risky investments and one must invest based on the individual risk appetite.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.