New Delhi, June 6 -- Among mutual fund categories, contra funds stand out for their distinctive investment strategy. Rather than following prevailing market trends, these funds look for opportunities in stocks or sectors that may be temporarily out of favour but have the potential for long-term growth.

Here's a look at what contra funds are, how they operate, their potential benefits and risks, and the key factors investors should assess before investing.

A contra fund is a type of equity mutual fund that follows a contrarian investment strategy and is required to invest at least 65% of its assets in stocks. The fund looks for companies or sectors that are out of trend, with the expectation that they will grow over time.

However, contr...