CNN Central News & Network–ITDC India Epress/ITDC News Bhopal: The world of equity investing is full of opportunities and risks. For investors looking to diversify their portfolios and pursue growth across various market segments, the Bajaj Finserv Multi Cap Fund can be a suitable option. The New Fund Offer (NFO) period of this fund is from Thursday, 6th February, 2025 to Thursday, 20th February, 2025. This new equity fund by Bajaj Finserv AMC adapts the contrarian investment strategy.
In this article, we will explore what contrarian investing is, what multi cap funds are, and how the Bajaj Finserv Multi Cap Fund leverages contrarian investing to help investors create a diversified portfolio with the potential for superior long-term returns.
What is contrarian investing?
Contrarian investing is an investment strategy where investors go against the prevailing market sentiment. While most investors tend to follow the crowd, buying when the market is bullish and selling during downturns, contrarian investors make decisions that are opposite to popular opinion. In other words, contrarian investors often buy when others are selling and sell when others are buying.
This strategy relies on the belief that markets tend to overreact to news – whether it’s positive or negative – and create buying opportunities when stocks are undervalued (during market corrections) or selling opportunities when stocks are overvalued (during market booms). A successful contrarian investor aims to profit by capitalizing on the market’s overreaction and the eventual return of rational pricing.
Key elements of contrarian investing include:
Patience: Contrarian investors must have the patience to hold onto investments until market sentiment shifts in their favour.
Research: A detailed understanding of undervalued or overvalued stocks and market trends.
Risk tolerance: Since contrarian investing often involves investing in companies or sectors that are out of favour, it carries higher risk, but also higher potential long term returns.
What are multi cap funds?
Multi cap funds are equity mutual funds that invest across different market capitalization categories: large cap, mid cap, and small cap stocks with minimum 25% across each of large cap, mid cap and small cap. These funds are designed to provide diversification across sectors and market segments, ensuring that the investor has exposure to a broad spectrum of companies.
Large cap stocks: These are shares of established companies with large market capitalization. They are relatively stable, and offer consistent, though lower, returns.
Mid cap stocks: These stocks belong to companies that are in the growth phase. They offer relatively better growth potential than large cap stocks but tend to be more volatile.
Small cap stocks: These are stocks of smaller companies, typically with high long term growth potential. They come with higher risk, as smaller companies are more vulnerable to market fluctuations.
By investing across all three segments, multi cap funds aim to provide both – growth potential and stability. They balance the risks of small cap investments with the relative stability and maturity of large cap stocks.
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