Staying invested in mutual funds for longer periods has been a time-tested strategy for wealth creation. Many financial experts and advisors stress on the importance of investing for a long time to take advantage the power of compounding.
One recent example of this compounding effect has been Invesco India Contra Fund. The fund has grown 11 times since its inception in 2007. In other words, had an investor placed Rs 1 lakh in the fund during its inception, the investment would have increased to Rs 11.57 lakh now.
Invesco India Contra Fund: What is it?
Invesco India Contra Fund was launched on Apr. 11, 2007. It follows a contrarian investment strategy. This means it identifies undervalued stocks that may not be in favour with the broader market initially, but hold strong fundamentals.
The fund aims to generate long-term capital appreciation by investing in such stocks at attractive valuations.
The scheme's approach is based on the belief that market trends are cyclical and that companies that are temporarily out of favour may present better investment opportunities later.
Invesco India Contra Fund: Performance over time
Here are the fund's returns over the years, according to Invescomutualfund.com.
1 year: Rs 1 lakh would have grown to Rs 1.06 lakh
3 years: Rs 1 lakh would have increased to Rs 1.58 lakh
5 years: Rs 1 lakh would have grown to Rs 2.39 lakh
7 years: Rs 1 lakh would have reached Rs 2.48 lakh
10 years: Rs 1 lakh would have risen to Rs 3.62 lakh
Since inception (2007): Rs 1 lakh would now be worth Rs 11.57 lakh
This translates to an annualised return of 14.7%.
Why has the fund performed so well?
Factors that have contributed to the success of Invesco India Contra Fund are:
Contrarian investment strategy: The fund buys undervalued stocks. Thus, it ensures that it picks quality companies at lower prices before the market recognises their full potential.
Long-term focus: By maintaining a long investment horizon, the fund has benefitted from compounding.
Diversified portfolio: The fund invests in a range of industries, reducing risks while maximising returns.
Fund size and asset allocation
As per the latest AMFI data, the fund has a total asset size of Rs 16,292 crore. Invesco India Contra Fund maintains a minimum of 65% allocation in equities. Its current allocation is at 97.5% in equity stocks and the remaining 2.5% in cash holdings.
Which companies does the fund invest in?
Some of the fund's holdings include:
HDFC Bank
ICICI Bank
Axis Bank
Infosys
Mahindra & Mahindra
Apollo Hospitals
NTPC
Larsen & Toubro (L&T)
Zomato
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