How much is the return of mutual funds in India? I want to invest to get the highest return with the least risk possible.Asked
Returns that an investor will get through mutual funds will depend on the risk that he is willing to take.
Following are the different funds :
· Debt Funds- This fund invest in debts and the risk involved here is very less. Investing in these funds is suggested for first time investors and aged people. Also people willing to take less risk and get a return of 7-10%.
· Large Cap Funds- Here the investment is made in large cap companies. These companies offer 12-18% return. Moderate risk is involved and it is suggested to invest here for 4 years or more.
· Mid Cap Funds- Here the investment is made in mid cap companies. These companies are offer 15-20% return. Moderately high risk is involved and it is suggested to invest here for 5 years or more.
· Small Cap Funds- Here the investment is made in small cap companies. These companies offer 15-20% return. High risk is involved and it is suggested to invest here for 6 years or more.
· Balanced Fund- This fund is a combination of equity and debt in its portfolio. Depending on the proportion of investment made in Equity and Debt, the risk and returns are accordingly determined. It is suggested to invest here for 2 to 3 years. Returns in this fund range from 11-14%.
Investment can be made via lump sum investment or through SIP (Systematic Investment Plan) mode in any of these funds. Moreover return is something that cannot be promised but these return estimates have been given on the basis of past performance. . Also for short term investment, it is preferred to invest in debt oriented funds but for long term purpose investors should allocate their money in different funds as per their risk appetite. To know about different types of funds click here
You can get moderate to very good returns in mutual funds. There are a variety of mutual funds available in the market. The returns you will get depends on a number of factors such as your investment objective, risk that you are willing to take, duration of your investment, type of mutual fund. So you need to look at all these factors before investing. Based on duration various mutual funds option available are:
Low duration (1 year)
Medium duration (3 years)
Balanced funds are best if you are looking to invest for medium duration. Money is invested in both debt and equity. Expected return is between 8% to 12% . Various options that you can consider under this are:
Long duration (5+ years)
Equity funds are best option if you are looking to invest for more than 5 years. Further you have various options depending on whether you are investing in small cap, mid cap or large cap funds.Investment in these again depends on your risk appetite and investment objective. Expected returns is between 12% to 20%. Various funds that you can consider are:
As you are looking for high returns at the least risk possible you can look to invest for longer duration in large cap funds. Large cap have shown good results in the past. But there is always risk involved when you invest in mutual funds.
You can read more about mutual funds considering the duration of investment on this link.
Mutual Funds are unique investment tools wherein the return you earn depends to a large extent on the investment horizon among other variables like risk bearing capacity, investment in companies based on their market capitalization. The general principle is that the more risk you take, the higher your returns are likely to be. However, since you are not looking for risky investments, I will classify returns on the basis of investment duration.
Historically, a positive correlation has been observed between returns generated by the fund and its investment horizon, that is long term investment in a fund has yielded returns superior to its short term counterparts.
If you're an investor looking at short term investments, investing in low duration debt-oriented funds can generate returns higher than that of Fixed Deposits. These funds are less risky than equity funds and are ideal for investment under one year. Historically, debt funds have generated returns ranging in the range of 7.00-9.00% p.a though funds like Short-Term Low Risk Portfolio has generated annualized rate of return of 9.99%.
Balanced funds or equity-oriented funds are the most suitable instruments in case you are looking for investing money for 2-4 years. These funds allocate majority of the funds in equity stocks, thereby enabling the investor to take the benefit of capital appreciation, but at the same time hedging the risk involved b investing some part of it in debt oriented funds. These funds have historically provided returns in the range of 8.00-12.00% p.a.
The highest returns accrue to those who invest for the long term, which is for 5 years or more. These returns have historically ranged between 15.00-20.00% p.a. These funds are heavily equity oriented and are thus more sensitive to market volatility. However, for the same reason, these funds have generated returns higher than any of those mentioned above.
Returns can also be classified on the basis of the company size. The companies are broadly classified into small cap, mid cap and large cap, depending on the market capitalization of the company. Though the limits for segregating companies according to their market capitalization differs from one fund house to another, the general consensus is that small cap companies are companies that are in early stage of development. Thus, they are relatively more risky but also have more potential for capital appreciation. On the other end of this continuum are large cap funds that invest in large companies that are comparatively less risky but offer returns lesser than small cap funds. Large cap funds have generated returns of 12.00-18.00% p.a. whereas those generated by small cap funds lie in the 15.00-20.00% p.a. range.
Hope this answers your question!
Mutual fund returns are different for different types of funds. Returns for your funds will depend on three main criteria:
Type of Fund
You may make use of different calculators for trying out the possible combination of your investments and respective expected rate of return.
There are wide variety of mutual fund available in market with different level of risk and return on investments. It all depends on your investment goals to invest into right mutual fund.
Based on duration of investment, these are various mutual funds option:
1. Investment for shorter duration, say for 1 year:
For shorter duration and easy liquidity, debt funds are best option and safest option. This is will reduce the risk of change in interest rate as well as give better return than parking in fixed deposits(FDs), given return anywhere between 7-10% per annum.
Some debt funds you can consider are:
2. Investment for shorter duration, say for 3 years:
For this investment duration, balanced funds are best, where an asset management company invest the money gather into both debt and equity. These are diversified mutual funds having perfect balance between risk and returns on investment, and will give you returns in the range of 8-12%.
Some balanced funds you can consider are:
3. Investment for longer duration, say for 5 years and more:
For longer duration and good return on investment, equity funds are best option. Wide options are available in these categories of mutual fund giving different returns as per risk involve. For large-cap funds, you can expect to get returns in the range of 12-15%, for mid-cap funds, you can get between 15-20% and small cap funds are riskier but over a long period of time, they can give returns as high as 20%. Even return on investment can go as high as to 28-30% for small cap funds.
Some balanced funds you can consider are:
Always remember, there is no guaranteed return on investment in mutual and its all depend on market. The figure mentioned above are based on historical data observed.
Mutual funds are of various types. And the returns you get depend on the risk you are willing to take and the duration you can invest your money for.
This link has a table to point out the returns for various types of mutual funds.
Mutual fund returns are not guaranteed. The above mentioned returns are returns that are historically observed.