{"id":13886,"date":"2026-05-27T07:32:19","date_gmt":"2026-05-27T07:32:19","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/contra-funds\/"},"modified":"2026-05-27T07:32:19","modified_gmt":"2026-05-27T07:32:19","slug":"contra-funds","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/contra-funds\/","title":{"rendered":"Contra Funds: Going Against the Crowd"},"content":{"rendered":"<h1 id=\"contra-funds-a-practical-guide-for-investors\">Contra Funds: A Practical Guide for Investors<\/h1>\n<p>Contra Funds are <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/equity\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">equity<\/a> <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/mutual-fund\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">mutual fund<\/a>s that follow a contrarian investment style. The fund manager picks <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/stocks\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">stocks<\/a> that are out of favour but show long-term value. Indian investors use contra funds to access opportunities that other investors may have missed.<\/p>\n<p>This guide explains how Contra Funds work and how to use them.<\/p>\n<h2 id=\"what-are-contra-funds\">What Are Contra Funds?<\/h2>\n<p>Contra Funds invest in stocks that are unpopular at the moment. The fund manager looks for undervalued companies with strong potential. The strategy goes against current market trends.<\/p>\n<p>The aim is to buy low and benefit when sentiment turns.<\/p>\n<h2 id=\"how-contra-funds-work\">How Contra Funds Work<\/h2>\n<p>When you invest in a contra fund:<\/p>\n<ul>\n<li>The AMC pools money from many investors<\/li>\n<li>The fund manager picks stocks based on contrarian views<\/li>\n<li>The <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/portfolio\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">portfolio<\/a> includes out-of-favour but strong companies<\/li>\n<li>The <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/nav\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>NAV<\/a> reflects daily value<\/li>\n<\/ul>\n<p>The fund needs patience to wait for the contrarian view to pay off.<\/p>\n<h2 id=\"why-contra-funds-matter\">Why Contra Funds Matter<\/h2>\n<p>Contra funds matter for three reasons:<\/p>\n<ol>\n<li>They offer access to overlooked opportunities<\/li>\n<li>They support long-term <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/value-investing\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">value investing<\/a><\/li>\n<li>They balance momentum-based strategies<\/li>\n<\/ol>\n<p>A clean contra fund offers <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/diversification\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">diversification<\/a> through style.<\/p>\n<h2 id=\"benefits-of-contra-funds\">Benefits of Contra Funds<\/h2>\n<p>These funds offer:<\/p>\n<ol>\n<li>Exposure to undervalued companies<\/li>\n<li>Active manager judgement<\/li>\n<li>Potential for high long-term returns<\/li>\n<li>Dive<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/rsi\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>rsi<\/a>fication away from momentum trades<\/li>\n<\/ol>\n<p>These benefits suit patient long-term investors.<\/p>\n<h2 id=\"risks-of-contra-funds\">Risks of Contra Funds<\/h2>\n<p>Contra funds also have risks:<\/p>\n<ul>\n<li>Long waiting periods for sentiment shifts<\/li>\n<li>Stock-specific risk<\/li>\n<li>Manager risk<\/li>\n<li>Short-term underperformance<\/li>\n<\/ul>\n<p>A long-term horizon helps manage these risks.<\/p>\n<h2 id=\"how-to-invest-in-contra-funds\">How to Invest in Contra Funds<\/h2>\n<p>A common method:<\/p>\n<ol>\n<li>Set a clear long-term goal<\/li>\n<li>Pick a contra fund with a strong track record<\/li>\n<li>Choose direct or regular plan<\/li>\n<li>Start <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/sip\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>SIP<\/a> or lumpsum investment<\/li>\n<li>Review the portfolio yearly<\/li>\n<\/ol>\n<p>A goal-based approach builds steady results.<\/p>\n<h2 id=\"contra-funds-in-indian-markets\">Contra Funds in Indian Markets<\/h2>\n<p>Indian contra funds invest in:<\/p>\n<ul>\n<li>Out-of-favour stocks<\/li>\n<li>Cyclical companies near <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/sector\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">sector<\/a> lows<\/li>\n<li>Misunderstood mid cap names<\/li>\n<li>Sometimes large cap turnarounds<\/li>\n<\/ul>\n<p>The portfolio shifts based on the manager&#x2019;s view.<\/p>\n<h2 id=\"tax-on-contra-funds\"><a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/tax\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>Tax<\/a> on Contra Funds<\/h2>\n<p>Tax rules:<\/p>\n<ul>\n<li>Short-term <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/capital-gain\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">capital gain<\/a>s (less than 1 year): 15 percent<\/li>\n<li>Long-term capital gains (more than 1 year): 10 percent above &#x20B9;1 lakh per year<\/li>\n<\/ul>\n<p>Tax rules can change. Confirm before investing.<\/p>\n<h2 id=\"sip-vs-lumpsum\">SIP vs Lumpsum<\/h2>\n<p>SIPs work well for steady investing. Lumpsum suits when you have a large sum and long horizon.<\/p>\n<p>Most retail investors prefer SIPs.<\/p>\n<h2 id=\"common-mistakes-with-contra-funds\">Common Mistakes With Contra Funds<\/h2>\n<p>New investors often:<\/p>\n<ul>\n<li>Expect quick returns<\/li>\n<li>Switch funds during slow phases<\/li>\n<li>Skip understanding the strategy<\/li>\n<li>Confuse with value funds<\/li>\n<\/ul>\n<p>A clean process avoids these errors.<\/p>\n<h2 id=\"tips-for-better-use\">Tips for Better Use<\/h2>\n<p>A few habits help:<\/p>\n<ol>\n<li>Be patient with contrarian strategies<\/li>\n<li>Trust the fund manager&#x2019;s view<\/li>\n<li>Use SIPs for steady investing<\/li>\n<li>Review the portfolio yearly<\/li>\n<li>Stay invested through cycles<\/li>\n<\/ol>\n<p>Sound habits build long-term wealth.<\/p>\n<h2 id=\"contra-funds-vs-value-funds\">Contra Funds vs Value Funds<\/h2>\n<p>The two are close cousins:<\/p>\n<ul>\n<li>Value funds: invest in <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/undervalued-stocks\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">undervalued stocks<\/a><\/li>\n<li>Contra funds: invest against current market sentiment<\/li>\n<\/ul>\n<p>The strategies often overlap but differ in style.<\/p>\n<h2 id=\"contra-funds-vs-growth-funds\">Contra Funds vs Growth Funds<\/h2>\n<p>The two differ:<\/p>\n<ul>\n<li>Growth funds: invest in fast-growing companies<\/li>\n<li>Contra funds: invest in out-of-favour companies<\/li>\n<\/ul>\n<p>They can complement each other in a portfolio.<\/p>\n<h2 id=\"long-term-investing-with-contra-funds\">Long-Term Investing With Contra Funds<\/h2>\n<p>Contra funds need patience. Many themes take years to play out. Stay invested through cycles to see the full benefit.<\/p>\n<p>A 5- to 10-year horizon often works best.<\/p>\n<h2 id=\"contra-funds-and-asset-allocation\">Contra Funds and Asset Allocation<\/h2>\n<p>Contra funds form part of equity allocation. Combine them with other equity styles, debt, and gold for full asset allocation.<\/p>\n<p>A balanced mix reduces overall risk.<\/p>\n<h2 id=\"manager-skill-matters\">Manager Skill Matters<\/h2>\n<p>In contra funds, the manager&#x2019;s view is everything. Check:<\/p>\n<ul>\n<li>Track record over many cycles<\/li>\n<li>Investment philosophy<\/li>\n<li><a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/risk-management\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Risk management<\/a><\/li>\n<\/ul>\n<p>A strong manager creates value through contrarian thinking.<\/p>\n<h2 id=\"key-takeaways\">Key Takeaways<\/h2>\n<ul>\n<li>Contra Funds invest against current market sentiment<\/li>\n<li>They pick out-of-favour but strong stocks<\/li>\n<li>They suit patient long-term investors<\/li>\n<li>Use SIPs and direct plans for steady investing<\/li>\n<li>Indian investors can use them for diversified equity exposure<\/li>\n<\/ul>\n<p>Contra Funds offer a thoughtful contrarian approach. Match the fund to your goals, stay patient, and let the manager&#x2019;s view work over time.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Contra Funds: A Practical Guide for Investors Contra Funds are equity mutual funds that follow a contrarian investment style. The fund manager picks stocks that are out of favour but show long-term value. Indian investors use contra funds to access opportunities that other investors may have missed. This guide explains how Contra Funds work and [&#x2026;]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-13886","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"Contra Funds: A Practical Guide for Investors Contra Funds are equity mutual funds that follow a contrarian investment style. The fund manager picks stocks that are out of favour but show long-term value. Indian investors use contra funds to access opportunities that other investors may have missed. This guide explains how Contra Funds work and&hellip;","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/13886","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/13886\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=13886"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}