You’re probably one of those people who says, “What’s life without a little bit of risk?”

But would you take risk with your investments?

I’m sure many wouldn’t. But then a question arises.

Should you take a risk with your investment, because funds as such give high returns?

Well, if you have analysed the funds and know your risk appetite, why not?

These funds are affected by market volatility, but the longer you stay invested, the higher are the possibilities to make good profit.

Let’s look at some of the best high-risk high-returns mutual funds for high-risk takers.

Top 5 high risk- high return funds

These are a mix of small-cap, multi-cap, and sector funds that show immense potential for the future.

1. ICICI Prudential Technology Fund – Direct – Growth

This is a sectoral equity oriented mutual fund launched on January 1, 2013. It is a fund with high risk and has given a return of 23.16% since its launch.

This fund has given a mouth-watering 53.8% return in the last 1 year.

ICICI Prudential technology
Fund Name 1Y 3Y 5Y Category Risk
ICICI Prudential Technology Fund - Direct - Growth 32.89% 12.83% 16.1% Equity
(Sectoral/Thematic)
High

Key details

  • This is a 5 star rated fund by Groww.
  • AUM is close to ₹391 Cr.
  • Age is nearly 5 years. So, its performance can be easily judged.
  • Has consistently outperformed its benchmark S&P BSE IT TRI since its launch.
  • The top 5 portfolio holdings of the fund include Infosys Ltd., Larsen & Toubro Infotech Ltd., Tech Mahindra Ltd., HCL Technologies Ltd. and Wipro Ltd.
  • The holdings are concentrated only on IT sector.
  • You can invest in this fund with a minimum a SIP of ₹ 1,000
  • Equity share = 90.2%, Debt share = 0% and Cash = 9.8%
  • Large Cap share = 86%, mid cap share = 0.8% and small cap share = 3.5%

This scheme aims to generate long-term capital appreciation for you from a portfolio made predominantly of equity and equity-related securities of technology intensive companies.

2.HDFC Small Cap Fund – Direct – Growth

This is a small cap equity oriented mutual fund launched on January 1, 2013. It is a fund with high risk and has given a return of 21.41% since its launch.

This fund has given a 26.1% YoY return in the last 5 years.

HDFC Small Cap Fund – Direct – Growth
Fund Name 1Y 3Y 5Y Category Risk
HDFC Small Cap Fund - Direct - Growth 1.38% 18.72% NA Equity
(Small Cap)
Moderately High

Key details

  • This is a 5 star rated fund by Groww.
  • AUM is close to ₹4,143 Cr.
  • Age is nearly 5 years. So, its performance can be easily judged.
  • Has consistently outperformed its benchmark NIFTY Smallcap 100 TRI since its launch.
  • The top 5 portfolio holdings of the fund include NIIT Technologies Ltd., Aurobindo Pharma Ltd., First Source Solutions Ltd., Sharda Cropchem Ltd. and SKF India Ltd.
  • The holdings are balanced across various sectors with maximum weight-age given to Industrial Manufacturing (18.5%) followed by IT (13.6%)
  • You can invest in this fund with aminimum a SIP of ₹ 500
  • Equity share = 83.8% , Debt share = 0% and Cash = 16.2%
  • Large Cap share = 3.4% , mid cap share = 51.2% and small cap share = 26.7%

3. Tata Digital India Fund – Direct – Growth

This is a sectoral equity oriented mutual fund launched on December 28, 2015. It is a fund with high risk and has given a return of 18.91% since its launch.

This fund has given a mouth-watering 53.8% return in the last 1 year.

Tata Digital Fund
Fund Name 1Y 3Y 5Y Category Risk
Tata Digital India Fund - Direct - Growth 38.37% NA NA Equity
(Sectoral/Thematic)
High

 Key details

  • This is a 4 star rated fund by Groww.
  • AUM is close to ₹197 Cr.
  • Age is nearly 3 years.
  • It has consistently outperformed its benchmark S&P BSE IT TRI since its launch.
  • The top 5 portfolio holdings of the fund include Infosys Ltd., Tata Consultancy Services Ltd., Tech Mahindra Ltd., NIIT Technologies Ltd. and Tata Elxsi Ltd.
  • The holdings are concentrated only on IT sector.
  • You can invest in this fund with aminimum a SIP of ₹ 500
  • Equity share = 96.9%, Debt share = 0% and Cash = 3.1%
  • Large Cap share = 58.5%, mid cap share = 34.8% and small cap share = 3.6%

This scheme seeks long term capital appreciation by investing atleast 80% of its net assets in equity/equity related instruments of the companies in Information Technology Sector in India.

4. Reliance Small Cap Fund

This is a small cap equity oriented mutual fund launched on January 1, 2013. It is a fund with high risk and has given a return of 28.87% since its launch.

This fund has given stellar 39.3% YoY return in the last 5 years.

Reliance small cap fund
Fund Name 1Y 3Y 5Y Category Risk
Reliance Small Cap Fund - Direct - Growth -5.25% 16.41% 32.22% Equity
(Small Cap)
Moderately High

Key details

  • This is a  4 star rated fund by Groww.
  • AUM is close to ₹6,696 Cr.
  • Age is nearly 5 years. So, its performance can be easily judged.
  • Has consistently outperformed its benchmark S&P BSE Small Cap since its launch.
  • The top 5 portfolio holdings of the fund include Zydus Wellness Ltd., V I P Industries Ltd., Cyient Ltd., Deepak Nitrite Ltd. and Navin Fluorine International Ltd.
  • The holdings are balanced across various sectors with maximum weight-age given to Consumer Goods (20.9%) followed by Industrial Manufacturing (16.5%)
  • You can invest in this fund with a minimum SIP of ₹ 100
  • Equity share = 91.1%, Debt share = 1.0% and Cash = 7.9%
  • Large Cap share = 4.6%, mid cap share = 47.9% and small cap share = 35.6%

This fund has exponential growth potential and has given high returns on investment and is best suited for investors with high risk appetite or for seasoned investors.

5. Invesco India Contra Fund – Direct – Growth

This is a contra equity oriented mutual fund launched on January 1, 2013. It is a fund with high risk and has given a return of 19.91% since its launch.

This fund has given stellar 27.2% YoY return in the last 5 years.

Invesco India Contra Fund
Fund Name 1Y 3Y 5Y Category Risk
Invesco India Contra Fund - Direct - Growth 3.16% 16.27% 24.21% Equity
(Contra)
Moderately High

Key details

  • This is a 4 star rated fund by Groww.
  • AUM of close to ₹919 Cr.
  • Age is nearly 5 years. So, its performance can be easily judged.
  • Has consistently outperformed its benchmark S&P BSE 500 TRI since its launch.
  • The top 5 portfolio holdings of the fund include Zydus Wellness Ltd., V I P Industries Ltd., Cyient Ltd., Deepak Nitrite Ltd. and Navin Fluorine International Ltd.
  • The holdings are balanced across various sectors with maximum weight-age given to Financial Services (31.9%) followed by Energy (14.8%)
  • You can invest in this fund with a minimum SIP of ₹ 500
  • Equity share = 95.9%, Debt share = 0% and Cash = 4.1%
  • Large Cap share = 70.3%, mid cap share = 22.9% and small cap share = 2.8%

The scheme seeks to generate capital appreciation by investing predominantly in Equity and Equity Related Instruments through contrarian investing.

What will be your investment strategy?

Now, given these 5 high potential funds, we need to discuss how you can ideally invest in them.

There is just two investment strategy you should follow to minimize risk.

1. SIP/STP

It is a good idea to invest in high return high risk-high return funds via SIP (Systematic Investment Plan).

SIP refers to investing a fixed amount in a mutual fund every month. What SIP does is it spreads your risk over a large period of time.

If you have a large sum of money you want to invest, SIP is not the best option to go with. Instead, explore the STP (Systematic Transfer Plan). 

In STP, you invest your money in a debt mutual fund.

And then, you gradually transfer that money to an equity mutual fund of your choice.

It is like starting a SIP but instead of paying from your bank account, you are paying from a debt fund.

This allows you to earn a higher rate of return as debt funds give higher returns when compared to savings bank accounts.

Read more:

2. Go Long Term. Always.

With high risk-high return mutual funds, always go long term.

The minimum period for which should be 5-6 years.

As mentioned earlier, high-risk high-return mutual funds tend to be very volatile. They may go up and down in the short term.

Over a long period of time, they tend to give good returns.

3. Balance your portfolio

When investing in high-risk funds, it is better to invest in a moderate/low-risk funds as well, so that your risk is moderated.

This way, if the market goes through a rough phase, your portfolio will remain balanced

Why are high risk – high return funds not for all kind of investors?

High-risk high-return mutual funds have given stellar returns.

But have you ever wondered, ‘what are the disadvantages of high-risk high-return funds?’.

Here are 3 reasons why you should stay away from high-risk high-return funds.

But wait, if these 3 points are not a problem, you should definitely invest in small-cap funds.

1. Risky

High-risk high-return mutual funds are very risky.

Which means, in the short term, investing in them could lead to short-term losses.

If you cannot tolerate seeing negative returns on your investments at certain periods, you should stay away from high-risk high-return funds.

Will it rebound? We don’t know. But in history so far, it has.

If you cannot see sharp ups and downs, it is better to stay away from these funds.

2. New Investor

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 riskier funds.

And once you have a genuine idea about the performance of mutual funds, you can explore these high risk- high return funds

3. Short Term Investor

If you are investing in mutual funds for a short duration, stay away from high risk – high return mutual funds.

High risk- high return mutual funds perform well over a long period of time. Over a short period of time, they tend to be very volatile.

So, if you plan on withdrawing/redeeming your money from the mutual fund early, you could suffer losses.

Sure, 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.

Conclusion

High-risk mutual funds refer to funds that have excellent potential and the ability to provide high returns.

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. 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 would agree on is that investing for the long-term is an ideal method to maximize potential gains and reduce risk.

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww