Nowadays, Mutual Funds are the most sought after investment instruments owing to the magnificent returns delivered by them in the past few years. Equity Mutual Funds invest in equity and equity related instruments of firms with different market capitalization. These securities have a high risk exposure, as returns are dependent on the market sentiment.
There’s a famous mantra that most investment professionals would swear by in the financial markets; which is that if one wants to earn high returns, s/he needs to take high risk. This is true in around 90% of the cases, even when comparing the returns of various mutual fund schemes. However, sometimes, over the past years, low risk mutual funds have also delivered significant returns.
Also, with the Systematic Investment Plan (SIP) mode of investment in Mutual Funds becoming popular, the risk exposure becomes relatively low due to rupee cost averaging. It means that when the market is high resulting in high Net Asset Value, you get fewer fund units and when the market is low, you buy more units of the fund.
Who should invest in High Risk Mutual Funds?
- High-Risk High-Return investment is meant for individuals who have a similar risk appetite and a long investment horizon. If you’re planning to retire soon, it is better to opt for relatively safer investment avenues such as Conservative Hybrid Mutual Funds or Long Duration Debts Funds.
- An individual should be patient when it comes to capital gains from high risk mutual funds. Since these funds are quite sensitive to market fluctuations, one needs to be calm during turbulent economic conditions and wait for the storm to pass by. In the long run, the underlying companies have a high chance of delivering significant returns.
Here is a list of top performing Mutual Fund Schemes in India that carry higher risk, but have the potential to deliver exponential returns and help in long term capital appreciation.
|Fund Name||AUM||3-Year Return||5-Year Return|
|SBI Small Cap Fund||₹2,704 crore||11.65%||18.73%|
|Kotak Emerging Equity Fund||₹4,960 crore||7.49%||13.68%|
|Axis Midcap Fund||₹3,200 crore||14.31%||13.21%|
|DSP Midcap Fund||₹6,348 crore||7.46%||13.10%|
|Franklin India Prima Fund||₹7,188 crore||6.70%||12.13%|
(Data as on October 31, 2019, Source: Value Research)