Category Archives: Finance

Contra Funds Explained – Contrarian Investment Strategy

A contrarian fund is a type of mutual fund following a contrarian investment strategy. Such funds will invest in stocks believed to be temporarily undervalued or out of favour, expecting that the market will one day recognise their true value. Contra fund managers are known for going against the prevailing market sentiment, buying what others are selling and selling what others are buying. This strategy requires a great understanding of market trends, patience, and the ability to identify long-term growth potential.

What Contrarian Means in Investment Strategy

The contrarian investment strategy suggests adopting positions opposite to those being held by the crowd. Contrarians assume that the majority of investors tend to act on emotion – fear and greed – rather than applying rational analysis. Consequently, they argue that the market tends to overreact in extremes, both in the positive and negative directions, thereby creating opportunities to benefit through mispriced assets.

How Contra Funds Work

Contra funds work by selecting stocks that are undervalued for the time being or have been neglected by the wider market. Such stocks are mostly found in sectors that may be having temporary setbacks or may be perceived as limited growth opportunities in the short run.

Advantages of Contra Funds

High Potential Returns: Contra funds have the potential for high returns in undervalued stocks once the market behaves rationally for a correction.

Diversification: Since contrarian funds invest across sectors that are presently unfavored, they easily promote diversification of their portfolio. This diversification might help the fund minimize risk against losses by spreading investments across many industries and asset classes.

Buying Stock at Lower Valuation: More so, contrarian funds tend to purchase stocks at a much lower valuation as compared to the market, which gives them somewhere to go when the price rises. This upside can create enormous wealth for investors when the market finally rights itself on behalf of the undervalued assets.

Contrarian Approach in Risk Management: A contrarian view uses fear and pessimism to its advantage, creating a situation that would allow a balance in risk through investment in companies that may have been excessively sold off due to short-term issues.

Risks of Contra Funds

Delay of Recovery: For a good recovery, however, it differs in that it may take a really long time for the market to realise the truth about the true value of stocks declared by contra funds, and therefore, for a long time, this investment can be trailing others in the market.

Timing Problems: Because contrarian funds depend entirely on market mispricing, they make it very difficult to pinpoint timing. Still, experienced fund managers may face big hurdles predicting when the value of that stock will be unlocked.

Increased Volatility: A lot of times, a higher volatility is expected in short-term periods because contra funds generally invest in stocks in a downturn or in crisis; hence, frequent fluctuations of the fund value occur.

Risk to Value Trap: The risk here arises when some stocks bought by contrarian funds either slide too far down forever or simply fail to become profitable, thereby making permanent losses. Value traps occur when a stock keeps performing poorly despite being fundamentally undervalued.

Investing in Contra Funds

A clear understanding of the investment strategy and risks related to it must also be in place before investing in contrarian funds. Investors interested in such funds may invest in them either via mutual fund platforms or via a mutual fund online Demat account opened for them with the help of any broking app.

Contra Funds Vs Other Mutual Funds

Contra funds differ from traditional mutual funds in that they are willing to invest in stocks that are unpopular or not currently in favor with the broader market. Other mutual funds, such as growth funds or index funds, typically invest in well-established companies or sectors that are expected to grow steadily. Growth funds tend to favor high-potential, high-growth companies, while contra funds focus on those that are undervalued or mispriced.

While growth funds may perform better in bullish market conditions, contra funds tend to outperform when the market corrects itself and undervalued stocks rise in value. In this sense, contra funds offer a counterbalance to other types of funds that focus on established, high-growth companies.

When to Consider Investing in Contra Funds?

Contra funds are best suited for investors having a long investment horizon and a high risk appetite. Thus, these funds may appeal to investors who are willing to have a contrarian view and bet against the market’s short-term trends.

Conclusion

Contra funds offer a contrarian and distinct way of wealth creation by investing in undervalued stocks and those that are presently not great investments.

Accounting Firms-Hire The best service providers

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In this era to run a business one needs to be highly vigil. In case of a slight error also, one may have to pay a heavy cost and that is why one must have effective accounting system with the help of which right decision can be taken by the owners at a very right time. One can expect better vision of business with better accounting system.

Accounting firms are employed by various businesses to handle and look after important financial tasks. Public companies hire accounting firms to audit their financial statements. Tax, management consulting, mergers and acquisitions and forensic accounting are other financial tasks performed by accounting firms. The services a business firm requires to obtain from accounting firms can be customized to meet the needs. It must include day-today bookkeeping, tax services, auditing, management consulting and fraud investigation. It can also serve as chief financial officer outsourced to provide financial assistance oversight for small business.

Accounting software US is used by accounting firms to offer wide range of services.

Bookkeeping services: The most basic service provided by accounting firms is bookkeeping. The financial transaction performed by business or a client is recorded by the accounting firms. The bookkeepers also need to access the transaction that affects every account and measure its value. Accounting firms are offering this service of book keeping but some bookkeepers might not be full-fledged accountants.

Accounting Services: Accounting and bookkeeping are much similar processes that involve identification, measurement and recording of financial transactions. Accounting goes a step further with interpreting and summarizing of these records. For the purpose of decision making by the business owners, the output received by accounting services is much useful. The final output of accounting services is well known as financial statement. It is compilation and summary of the financial transactions of the business firm.

Tax Preparation Services: All types of business are required to pay certain amount of taxes according to the guidelines of government. Some firms and people find preparation of tax return to be complicated task, especially large companies. Professional tax preparers are hired to do this task as for wrong tax return you can be fined. The most common service offered by accounting firms is tax preparations. Identification of taxes applicable for clients is done and computation of correct tax due is also found out.

Internal Audit Services: Auditing is the inspection of various aspects of the company that includes records, policies or processes. The auditor is appointed to lessen the possibility of any bias during auditing process. Accountants help in determining any underlying issues that business owners need to be addressed.

Budgeting and Forecasting Services: Budgeting means designing a strategy to put up as financial strategy for a long period of time. Planned volume of sales and revenues, cost and expenditure, assets, resource quantities, liabilities and cash flows are included in this strategy. These details are utilized by Companies, families, governments and several organizations to express plans for actions or events. Whether big or small firm, it will certainly have a planned budget and forecast for a year or so.

Simple Procedure of Opening Free Demat Account Quickly

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The word ‘Demat’ is the short form of ‘dematerialization’, which is introduced to avoid the long process needed in the transfer of printed share and stock certificates. It is an electronic form of security bond that is issued for the same cost as the physical share certificates. As all financial investments and trades are now digitalized, interested investors need to open a Demat account earning profits from this sector. They should know how to open a free Demat account in India, which is an easy procedure.

Choose a Depository Participant for trading

If you are interested in online share trading, you need to select any suitable Depository Participant (DP) agent from the Indian financial market. You should choose the best DP that is well-known for superb performances and the best customer services. The wide experience of the financial company and its uses of technology for research-based trading are also prime factors for the selection of a DP.

Download the Demat account from the website of your DP

The first step for opening a Demat account is to download the form from the website of the Depository Participant that you have chosen. You need to fill up this online form with the basic details, like your name and mobile number. This contact will be immediately verified by sending an OTP to the registered mobile number. Then you need to provide your email address, date of birth, PAN number, and bank details on the given spaces of the online form.

Attach all the required documents for verification

You need to upload various documents, like the scan copies of your PAN card, Aadhaar card, canceled bank cheque, and a passport photo. All these important documents are needed for verifying your age, address, and financial status. Further in-person verification will be done by this financial company when you need to show all original copies of your given documents. Then these details will be processed for starting your Demat account.

Receive all details of your Demat account via email

This Depository Participant creates a Client ID for your new Demat account and all these necessary details are sent to your registered email address. Now, you can access your account with the help of this ID, to start trading online. You do not need to have a minimum balance in this account for online financial transactions. You also do not need to hold any share for trading on this online platform.

Though you can open a free Demat account in India, you need to pay a certain amount of money for the annual maintenance service of this account. Moreover, you need to pay for every trade that is conducted online with the guidance of your DP. If you had some stock shares in traditional printed form, you need to pay for digitalizing these shares and including in your newly formed Demat account. However, there are many benefits of opening a Demat account for investors. You will get expert advice from expert finance analysts before trading and immediate help if needed for maintaining a balanced portfolio. You can chat online with these experts via Skype or Whatsapp anytime for obtaining advice.