Hello, welcome back. So far we have discussed strategies for selection of equity funds, debt funds, index funds and balanced funds. Next, let's discuss the strategy for selection of contract funds. As has been our strategy with the other type of mutual funds, we start by taking recommendations of experts, the financial newspapers, websites etc. For a few contra funds that we will analyze before making the final selection for the Contra fund of funds that we will invest in. It is not practical that we study all the different contra funds available in the market before we make the selection of a single or a few contra funds to invest in.

Now after we have made the choice of the Contra funds from the recommendation, then we find the fundamentals of each of the Contra funds. That is we find the metrics what is available publicly for each of the Contra funds. Now from these metrics, we take the Contra funds for investment. We'll check what the minimum standard deviation We know that standard deviation is a measure of risk, that is how much risk this particular mutual fund will have. Now, contra funds by the nature or against the wind strategies, that is they go by taking a huge risk on the existing market and make a selection of very low performing stocks to invest in. So, these are very high risk mutual funds for investment that is why we found among these high risk mutual funds, we take the Contra fund which have got the minimum risk or the minimum standard deviation.

For the purpose of illustration I have taken three contra funds from the Indian market again these are in no way any recommendation This is just for the purpose of illustration, the Contra funds that have considered our Invesco India contra fund, Kota India EQ contra fund SBI contra fund from the Economic Times website I have gathered the figures of expected return standard deviation of beta or These three contra funds. Now, if you notice that the beta of these contra funds is much less than one, this is going by the strategy of a contra fund because contra funds invest in low performing stocks. So, the low performing stocks are supposed to yield a beta which is much less than what the market is expected to move at. So, the Contra funds Krita is much less than one indicating that the Contra fund should be earning much less than what the market should be returning.

However, this is the base strategy always the counterparts work that these low performing stocks will turn around and beat the market. Next I have arranged the Contra funds in the ascending order of their standard deviation. So, we find that Kota India EQ contra fund has the least standard deviation from among these three contra funds. So, we will select that in our portfolio as we require only one for contra fund in our sample portfolio. Now in case the terms the expected return standard deviation beta not making sense To you please refer to the course mastering mutual fund investment part two of three. Human here are the metrics of our selected contra fund Kota India IQ contra fund.

This data I have collected from Economic Times website. Thank you for listening. See you in the next lecture.