Rather than investing directly in a specific stock, one may consider using a mutual fund as an investment vehicle, as it consists of a portfolio of companies that are professionally managed by fund managers. This helps reduce your risk to some extent while giving you the greatest risk-adjusted returns. Investing in mutual funds is ideal for portfolio diversification as they offer higher long-term returns and help you build wealth. Financial advisors usually recommend looking at past performance, stock holdings, fund manager experience, sector allocation and more. But in this section, we will focus on SBI Contra Fund – Direct Plan – Growth, which has been outperforming all other funds in its category based on multiple risk ratios.
SBI Contra Fund – Direct Plan – Growth
The fund was launched on 14 July 1999 and is now rated 1 by CRISIL and 5 by Value Research. As on June 30, 2022, SBI Contra Direct Plan-Growth has assets under management (AUM) of Rs. 5291.25 crore, and as on August 26, 2022, the fund’s NAV will be Rs. 229.66. The fund’s expense ratio, which is 1.25 percent, is higher than the majority of other funds in the same category. Since its launch, SBI Contra Direct Plan-Growth has generated an average return of 15.01% per annum and 22.06% over the previous year, indicating that the fund doubles investors’ money every two years.
The fund has generated annual SIP returns of 24.09% during the last five years, which has translated into SIPs. 10,000 investment from five years ago is almost happening Now 10.89 lakhs. The fund has given an annual SIP return of 36.79 per cent in the last three years, which means that a SIP 10,000 invested in this fund three years ago would have grown to approx. 6.05 lakhs.
How SBI Contra Fund – Direct Plan – Growth is performing best in its category?
SBI Contra Fund outperformed its counterparts including ICICI Prudential Value Discovery Fund, Templeton India Value Fund, IDFC Sterling Value Fund, Tata Equity PE Fund and Nippon India Value Fund in the last year with a 1-year annualized return of 21.03%. , The fund outperformed its indicated counterparts in the last six months with an annualized gain of 12.75 per cent. Apart from its recent performance, the fund is performing well in terms of risk ratio as compared to its rivals.
A standard deviation is a ratio that indicates the risk profile or volatility of a mutual fund’s returns; The lower the ratio, the better the fund can perform and provide returns above the category average. SBI Contra Fund has a standard deviation ratio of 20.07, which is lower than the category average of 20.94 and indicates lower volatility than its peers. India Invesco Kotak India EQ Contra Fund – Direct Plan – Growth, DSP Flexi Cap Fund – Direct Plan – Growth, and Contra Fund – Direct Plan – Growth all have standard deviation ratios of 21.31, 21.43 and 21.07 respectively.
The beta ratio reflects the relative volatility of a mutual fund against its benchmark index. SBI Contra Fund has a beta ratio of 0.87 as compared to the category average of 0.93, indicating that the mutual fund is relatively less volatile as compared to its benchmark S&P BSE 500 TRI. Invesco India Contra Fund – Direct Plan – Growth has a beta ratio of 0.96, Kotak India EQ Contra Fund – Direct Plan – Growth has a beta ratio of 0.97 and DSP Flexi Cap Fund – Direct Plan – Growth has a beta ratio of 0.94, all SBI Contra Funds The high beta ratio of these funds as compared to BTC indicates how volatile they are.
A fund’s risk-adjusted relative return is measured using the Sharpe ratio, which is a measure of an investment’s return after accounting for all underlying risks. SBI Contra Fund has a Sharpe Ratio of 1.11, higher than the category average of 0.81, indicating that it has outperformed its peers in terms of risk-adjusted returns. For example, Invesco India Contra Fund has a Sharpe Ratio of 0.69, Kotak India EQ Contra Fund has a Sharpe Ratio of 0.64, and DSP Flexi Cap Fund – Direct Plan has a Sharpe Ratio of 0.67.
Jensen’s alpha ratio shows how the risk-adjusted return of a mutual fund scheme compares to the market return estimated by the Capital Asset Pricing Model (CAPM). GENESIS Alpha Ratio for SBI Contra Fund is 9.17, which is higher than the category average of 2.93, indicating that the fund has exceeded the returns expected by the market. Its peers such as Invesco India Contra Fund has a Jensen alpha ratio of 0.2, Kotak India EQ Contra Fund has a Jensen alpha ratio of -0.59 and DSP Flexi Cap Fund – Direct Plan – Growth has a Jensen alpha ratio of 0.18, indicating That’s how with the exception of SBI Contra Fund, the fund has underperformed the market in terms of all the risk measures mentioned above.
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