Are High Risk-high Return Funds Your Cup Of Tea?

24 August 2022
4 min read

You probably belong to the group of people who believe that life is meaningless without a little bit of risk. But would you gamble with your money? Many probably wouldn't. But then, a query appears:

Given that these funds have high returns, should you take a chance with your investment? Why not if you've studied the funds and know your risk tolerance? Market volatility impacts these funds, but the longer you invest, the greater your chances of making a good return.

For investors, small and medium-sized businesses typically carry higher risk. However, they also develop into top companies in the future and produce higher returns. Professional Small & Mid Cap Fund Managers are best at spotting high-potential stocks. As a result, we've compiled a list of India's top-performing High-Risk, High-Return Mutual Funds for 2022 in this blog post.

Top High-Risk High-Return Mutual Funds 2022

 S.No.

High-Risk High-Return Investments in India

1.

PGIM India Mid-Cap Opportunities Fund

2.

Kotak Small Cap Fund

3.

Nippon India Small Cap Fund

4.

Axis Small Cap Fund

5.

SBI Small Cap Fund

Factors to Consider Before Investing in High-Risk, High-Return Mutual Funds

The following crucial elements should be taken into account when investing in High-Risk Mutual Funds:

  • Investment Objective

High-Risk High-Return investments prioritize capital growth. As a result, they are appropriate for long-term objectives like saving for retirement or purchasing a home.

  •  Risk-Reward Ratio

The higher reward is a higher risk. Mutual Fund investments with a high degree of risk have a good chance of producing impressive returns. On the other hand, individually investing in highly volatile securities can be expensive and risky.

On the other hand, long-term gains from investing in high-risk Mutual Funds are possible. Long-term volatility in the scheme should average out and contribute to generating sizable returns.

  • Investment Term

Investment options for the long term include high-risk funds. Due to the scheme's volatility, long-term investments are necessary to average the uncertainty and produce meaningful returns.

  • Asset Allotment

Emerging companies or low-rated schemes are high-volatility securities in which high-risk funds invest. Therefore, an asset allocation plan is crucial when selecting a mutual fund.

  • Not for All Kinds of Investors

High-risk, high-return mutual funds are very risky. This means that in the short term, investing in them could lead to short-term losses. Therefore, if you cannot tolerate negative investment returns at specific periods, you should avoid high-risk, high-return funds.

Will it rebound? We don’t know. But in history so far, it has. So if you cannot see sharp ups and downs, staying away from these funds is better.

  • New Investors

Are you a new investor? Don’t simply get swayed by the higher returns. In fact, for new investors, it would be best to start investing with less risky funds. And once you have a genuine idea about the performance of mutual funds, you can explore these high-risk- high-return funds.

  • Short Term Investor

If you are investing in mutual funds for a short duration, stay away from high-risk – high-return mutual funds. On the other hand, high-risk- high return mutual funds perform well over a long period.

Over a short period, they tend to be very volatile. So, if you plan on withdrawing/redeeming your money from the mutual fund early, you could suffer losses. You could also make gains, but there is always the risk. Hence, if you are a short-term investor, stick with low-risk debt funds.

Performance of the Best High-Risk High-Returns Mutual Funds

1) PGIM India Mid-Cap Opportunities Fund

The scheme seeks to achieve long-term capital appreciation by predominantly investing in equity & equity-related instruments of mid-cap companies.

2) Kotak Small Cap Fund

The scheme seeks to generate capital appreciation from diversified equity and equity-related securities portfolio by investing predominantly in small-cap companies.

3) Nippon India Small Cap Fund

The scheme seeks to generate long-term capital appreciation by investing predominantly in equity and equity-related instruments of small-cap companies.

4) Axis Small Cap Fund

The scheme seeks to generate long-term capital appreciation from a diversified portfolio of predominantly equity & equity-related instruments of small-cap companies.

5) SBI Small Cap Fund

The scheme seeks to provide investors with opportunities for long-term capital growth along with an open-ended scheme's liquidity by investing predominantly in a well-diversified basket of equity stocks of small-cap companies.

Conclusion

High-Risk Mutual Funds refer to funds with excellent potential and the ability to provide high returns. So naturally, they are not everyone's cup of tea. Find out if they are yours and if yes, then which fund you should pick.

High Return Investments often come with high risks. Therefore, these are preferably long-term investments with a long holding period.

SIP is a relatively safe method to invest in these High-Risk Mutual Funds. And if you want to invest in these mutual funds through lumpsum, you must do it via STP. There are a lot of factors you should take into consideration before selecting a Mutual Fund scheme that matches your investment goals.

Mutual Fund investors in India may disagree on strategies and fund choices, but one of the few things that most agree on is that investing long-term is an ideal method to maximize potential gains and reduce risk.

Happy Investing!

To read the RA disclaimer, please click here
Research Analyst - Bavadharini KS

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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