Top High Risk Mutual Funds to Invest Online in 2024
High risk mutual funds might come with a significant share of risks when compared to other mutual funds. Thus, risk here means the probability of losing your investments. The levels of this probability can be categorized as low, moderate, and high, set by SEBI’s risk-o-meter. So if you’re comfortable with taking on more risks in exchange for the potential of higher returns, these funds can be suitable for you. Let’s have a look at it.
What are High Risk Mutual Funds?
High risk mutual funds are investment vehicles that can carry a greater probability of both significant gains and substantial losses compared to other types of mutual funds. These funds typically invest in assets or securities with higher volatility and potential for larger returns. But they may also come with an increased level of uncertainty and the possibility of losing a significant portion of the invested capital.
Investing in small and medium-cap companies holds significant growth potential.
However, their stock prices may sharply decline in a bearish market or if they underperform. The best high returns mutual funds India can sometimes focus on debt securities with higher yields but lower credit ratings.
On the other hand, the best high return mutual funds that concentrate on large-cap companies are considered relatively safer. However, even these funds face the inherent risks of the equity market.
Asset Management Companies (AMCs) conduct thorough research to assess the potential for attractive returns. It’s crucial for investors to examine the past performance of the best high risk mutual funds before making investment decisions.
List of Best High Risk High Return Mutual Funds in India 2024
Here is a list of high risk high return mutual funds that you might consider investing in.
| Name | Sub-Category | Fund Size (in Cr) | Returns (1Y) | SEBI Risk Category |
|---|---|---|---|---|
| HDFC Dynamic PE Ratio FoF Direct Growth | Other | ₹42 | 27.9% | High |
| ICICI Prudential Asset Allocator Fund (FOF) Direct Growth | Other | ₹21,399 | 22.4% | High |
| SBI Conservative Hybrid Fund Direct Growth | Hybrid | ₹9,481 | 15.4% | High |
| LIC MF Gold ETF FoF Direct Growth | Other | ₹46 | 9.8% | High |
| ICICI Prudential Bharat Consumption Fund Direct Growth | Equity | ₹2,209 | 42.2% | High |
| Franklin India Dynamic Asset Allocation Fund of Funds Direct Growth | Other | ₹1,290 | 28.8% | High |
| Sundaram Equity Hybrid Fund Direct Growth | Hybrid | ₹1,954 | 30.1 | High |
| Tata Balanced Advantage Fund | Hybrid | ₹8,516 | 24.6% | High |
| ICICI Prudential Balanced Advantage Fund | Hybrid | ₹54,141 | 21.8% | High |
| Sundaram Balanced Advantage Fund Direct Growth | Hybrid | ₹1,523 | 22.5% | High |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data on the top high returns mutual funds in India in the list is from 26rd February, 2024. However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!
Top 10 High Risk Mutual Funds Overview
Let’s look at the high-risk mutual funds in detail.
HDFC Dynamic PE Ratio FoF
Over the past three years, the HDFC Dynamic PE Ratio FoF Fund has delivered annualized returns of 17.34%, while over the last five years, it has achieved returns of 16.12%. This fund is categorized under the “Other” segment of HDFC Mutual Funds.
ICICI Prudential Asset Allocator Fund (FOF)
Over the past three years, the ICICI Prudential Asset Allocator Fund has delivered annualized returns of 15.06%, while over the last five years, it has yielded 15.15%. Classified under the “Other” category of ICICI Prudential Mutual Funds, the fund offers a diversified investment opportunity.
SBI Conservative Hybrid Fund
This fund has delivered annualized returns of 10.94% over the past three years and 11.47% over the last five years. This fund is categorized as a Hybrid Fund within the SBI Mutual Funds portfolio.
LIC MF Gold ETF FoF
The LIC MF Gold ETF Fund of Funds has recorded annualized returns of 8.82% over the past three years and 12.19% over the last five years. This fund falls within the “Other” category of LIC Mutual Funds.
ICICI Prudential Bharat Consumption Fund
ICICI Prudential Bharat Consumption Fund Direct Growth belongs to the Equity category within ICICI Prudential Mutual Funds.
Franklin India Dynamic Asset Allocation Fund of Funds
For the last three years, This fund has delivered annualized returns of 20.43%, while over the last five years, it has yielded returns of 13.43%. This fund falls within the “Other” category of Franklin Templeton Mutual Funds.
Sundaram Equity Hybrid Fund
The Sundaram Equity Hybrid Fund has delivered annualized returns of 17.11% over the last three years and 15.7% over the past five years. This fund is classified within the Hybrid category of Sundaram Mutual Funds.
Tata Balanced Advantage Fund
Tata Balanced Advantage Fund Direct Growth has demonstrated an annualized return of 14.44% over the last three years and 15.08% over the past five years. This fund falls within the Hybrid category of Tata Mutual Funds.
ICICI Prudential Balanced Advantage Fund
In the past three years, the ICICI Prudential Balanced Advantage Fund has delivered annualized returns of 13.51%, while over the last five years, it has yielded 14.07%. This fund falls within the Hybrid category of ICICI Prudential Mutual Funds.
Sundaram Balanced Advantage Fund
The ICICI Prudential Balanced Advantage Direct Growth scheme has shown an annualized return of 13.16% over the last three years and 13.94% over the past five years. Classified under the Hybrid category of Sundaram Mutual Funds, the Sundaram Balanced Advantage Fund stands out for its consistent performance.
How Do High-Risk Mutual Funds Work?
High risk high mutual funds lists operate by investing in volatile assets, such as growth stocks, small-cap companies, or sectors prone to market fluctuations. These funds pursue aggressive strategies with the potential for higher returns. While they come with increased uncertainty and short-term volatility, they attract investors seeking substantial profits during favourable market conditions. Investors often use portfolio diversification to manage risk, and making strategic investment decisions requires crucial active fund management.
Features of High Risk and High Return Mutual Funds
Here is a list of features of potentially very high risk mutual funds.
- Type: Comes in diverse categories, including balanced advantage schemes, credit risk fund schemes, equity hybrid fund schemes, and more.
- Asset Allocation: Invest primarily in stocks or bonds of emerging or growing companies, with the asset allocation tailored to the specific type of high-risk and high-return mutual fund.
- Risk Reward Return Ratio: While high risk high return mutual funds entail substantial volatility, as the name implies, the best ones in 2024 also present significant returns, reflecting a favorable risk-reward ratio.
Who Should Invest in High Risk Mutual Funds?
High risk mutual funds can be best suited for investors who can handle risk. Those with a robust risk appetite, willing to embrace portfolio volatility can explore the top high risk mutual funds. It’s important to note that these funds typically yield significant returns over a more extended time horizon. Investors adopting an aggressive yet patient investment approach may find these funds fitting.
Factors to Consider Before Investing in High Risk Mutual Funds
Before investing in high risk high return mutual funds, several key factors should be carefully considered:
- Investment Goals: High risk funds may align with goals that involve capital growth and are suitable for investors seeking potentially higher returns over an extended period.
- Risk Tolerance: Assess your risk tolerance and capacity to withstand market volatility. High risk mutual funds involve a higher level of uncertainty and potential for losses, so understanding your comfort level with risk is crucial.
- Time Horizon: Consider your investment time horizon. The top high return mutual funds often require a longer holding period to ride out short-term market fluctuations and benefit from the growth potential of the underlying assets.
- Fund Performance: Evaluate the historical performance of the fund. Analyze past returns and compare them with similar funds to gauge consistency and effectiveness in delivering returns over different market conditions.
- Expense Ratio: Understand the expense ratio, which represents the annual fees as a percentage of the fund’s average net assets. Lower expense ratios can contribute to higher overall returns, so it’s essential to be aware of the cost implications.
- Diversification: Examine the fund’s diversification strategy. A well-diversified portfolio can help mitigate risk by spreading investments across different asset classes and sectors.
- Fund Manager Expertise: Assess the expertise and track record of the fund manager. A skilled and experienced fund manager can make strategic decisions to navigate the challenges of high risk high return mutual funds effectively.
How to Invest in High Risk High Return Investments?
There are two avenues for investors to venture into high risk high return investments in India: Systematic Investment Plans (SIPs) or lump sum investments. With SIPs, investors can regularly contribute a fixed amount to the fund based on their financial capacity. Conversely, lump-sum investments require individuals to commit a specific amount at once. Typically, SIPs have a minimum investment threshold of Rs. 500, whereas lump-sum investments may necessitate Rs. 1000 or more.
Risks Involved While Investing in High Risk Mutual Funds
Investing in high risk equity funds comes with several inherent risks that investors should be aware of:
- Market Volatility: They can be more susceptible to market fluctuations, which can lead to rapid and significant changes in the fund’s value.
- Loss of Principal: The value of high risk investments can decline, and investors may not recover their initial capital.
- Economic Downturn: High risk high return investments in India can be particularly sensitive to economic downturns. Economic challenges can negatively impact the performance of the underlying assets, leading to losses for investors.
- Industry and Sector Risks: Funds focused on specific industries or sectors may be vulnerable to adverse developments in those areas. Concentrated exposure increases the risk if a particular sector faces challenges.
- Liquidity Risks: Some high risk assets may lack liquidity, making it challenging to sell them quickly in the market. This illiquidity can exacerbate losses during turbulent market conditions.
- Interest Rate Risks: High risk funds, especially those holding bonds, are exposed to interest rate risks. These high interest mutual funds can lead to a decline in bond prices, affecting the fund’s overall performance.
- Long-Term Commitment: High risk funds may require a longer investment horizon to weather short-term market fluctuations. Investors should be prepared for a more extended commitment to potentially realize returns.
- Overconfidence Bias: Investors attracted to high risk funds may exhibit overconfidence in their ability to predict future movements.
Benefits of Investing in High Risk Mutual Funds
Here are some key advantages associated with investing in the best high risk mutual funds in 2022:
- Higher Returns: The top high risk mutual funds excel in delivering comparatively higher returns than many other investment options. Debt-based funds, focusing on low-rated bonds, can yield significant returns, while equity-based funds allocate assets to growing companies’ stocks, enhancing the potential for good returns than large-cap funds.
- Long-Term Capital Appreciation: High risk funds demonstrate optimal performance over 5-7 years, making them suitable for achieving long-term financial goals. Additionally, these funds are adept at generating returns that keep pace with inflation.
- Tax Benefits: Investors in higher income tax brackets can enjoy more tax-efficient returns compared to traditional bank fixed deposits.
- Opportunity to Beat Benchmarks: During positive market cycles, high risk category mutual funds have the potential to outperform benchmark indices.
- Flexible Investment Modes: Investors can choose between two investment modes – Systematic Investment Plan (SIP) or lump sum. With high risk SIP, investors can flexibly invest a fixed amount in the high risk high return SIP scheme based on their financial capacity and calculate their high risk returns via smallcase SIP calculator. In the lump-sum method, individuals invest a specific amount at once.
What are the Returns on the Best High Risk Mutual Funds & How are they Calculated?
High risk funds, also known as aggressive or growth funds, typically invest in stocks, small-cap companies, or emerging markets, offering the potential for higher returns but also carrying greater risk.
To calculate the returns on high risk funds, the following methods are commonly used:
- Total Return: This represents the total change in the value of a mutual fund’s shares over a given period. This includes both capital appreciation and dividend income. It is calculated as the difference between the net asset value (NAV) of the fund at the beginning and end of the period, expressed as a percentage.
- Annualized Return: Calculated using the compound annual growth rate (CAGR) formula. Consider the fund’s returns and reinvestment of dividends over the period.
- Sharpe Ratio: Measures the excess return of a mutual fund compared to a risk-free investment, such as a government bond, relative to its volatility. A higher Sharpe ratio indicates better risk-adjusted performance.
- Sortino Ratio: This is a variation of the Sharpe ratio that focuses on downside risk rather than overall volatility. It penalizes negative returns more heavily, providing a better measure of a fund’s performance in volatile markets.
- Maximum Drawdown: This represents the largest percentage decline in the value of a mutual fund’s shares from a peak. It provides an indication of the potential downside risk associated with the fund.
It is important to note that past performance is not necessarily indicative of future results, and high risk mutual funds can experience significant losses.
Taxation on High Risk Mutual Funds as per the Union Budget of 2024-25
The taxation on capital gains from your mutual fund investments is based on their holding periods and asset allocation. A few revisions were made to the tax rates, depending on their types, in the Union Budget 2024-25. It may be important to learn about these revisions when considering high risk mutual funds. These changes include:
Equity Mutual Funds
- Short-Term Capital Gains (STCG): The gains from equity mutual funds held for less than 12 months are now taxed at 20%. This is an increase from the previous tax rate of 15%.
- Long-Term Capital Gains (LTCG): For equity mutual funds held for over a period of over 12 months, gains are classified as long-term capital gains. The new budget introduces these key changes to the LTCG:
- Tax-Free Limit: The capital gains up to Rs. 1.25 lakh per year are tax-free. This is an increase from the previous limit of Rs. 1 lakh.
- Tax Rate: The gains exceeding Rs. 1.25 lakh are now taxed at a flat rate of 12.5%. This is an increase from the previous rate of 10%.
- Indexation: The benefit of indexation, which allowed investors to adjust the purchase price for inflation, has been removed for all asset classes, including equity mutual funds.
Indexation was a method that allowed investors to adjust the purchase price of assets for inflation. This adjustment reduced taxable profits when selling assets like property or gold. Previously, these long-term capital gains were taxed at 20%. The new rule imposes a flat 12.5% tax on all long-term capital gains but eliminates any indexation benefits.
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 12 months | 15% | 20% |
| Long-Term Capital Gains (LTCG) | More than 12 months | 10% | 12.50% |
Debt Mutual Funds
- Short-Term Capital Gains (STCG): If you sell your debt fund units within a period of 36 months, the gains are classified as short-term capital gains. The STCG will be taxed according to your income tax slab rate.
- Long-Term Capital Gains (LTCG): For debt funds held for a period over 36 months, the gains are classified as long-term capital gains. The new budget outlines a few changes on the LTCG for debt funds, including:
- Tax Rate: A flat 12.5% tax rate applies to these gains.
- No Indexation Benefit: The previous benefit of adjusting the purchase price for inflation is removed. Now, the entire gain after three years is taxable at 12.5%.
- Change in Holding Period for Specified Mutual Funds: Previously, debt mutual funds with a holding period of over 36 months were taxed based on the investor’s tax slab, classified as Long-Term Capital Gains (LTCG). Now, for specified mutual funds where over 65% of the investment is in debt, the holding period for taxation has been reduced to over 24 months. These funds will still be taxed according to the investor’s tax slab as either LTCG or STCG.
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 36 months | Taxed according to your income tax slab | Taxed according to your income tax slab |
| Long-Term Capital Gains (LTCG) | More than 36 months | 10% | 12.50% |
Hybrid Mutual Funds
Short-Term Capital Gains (STCG)
The tax on short-term capital gains depends on the fund’s asset allocation when it comes to hybrid mutual funds. Here is a breakdown of STCG tax rates according to their asset allocation in hybrid funds:
- Equity-Oriented Hybrid Funds (more than 65% in equity): The gains from units sold within 12 months are taxed at 20%.
- Debt-Oriented Hybrid Funds (less than 65% in equity): The gains from units sold within three years are taxed according to your income tax slab.
Long-Term Capital Gains (LTCG)
The capital gains tax on hybrid mutual funds that extend the specified period (12 or 36 months) is known as the long-term capital gain tax. The tax treatment under this condition is as follows:
- Equity-Oriented Hybrid Funds: The gains from units held for over a period of 12 months are taxed at 12.5%. The gains up to Rs. 1.25 lakh are tax-free.
- Debt-Oriented Hybrid Funds: The gains from units held for over a period of 36 months are taxed at 12.5% without indexation benefits. This means the entire gain is taxed at this rate, without adjustment for inflation.
| Type of Hybrid Fund | Short-Term Capital Gains (STCG) | Long-Term Capital Gains (LTCG) | Indexation Benefit |
| Equity-Oriented Hybrid Funds | 20% for holdings less than 1 year | 12.5% for holdings over 1 year, with gains up to Rs. 1.25 lakh tax-free | Not available |
| Debt-Oriented Hybrid Funds | Taxed as per income tax slab for holdings less than 3 years | 12.5% for holdings over 3 years | Not available |
Note: Mutual fund schemes where neither the equity nor debt orientation exceeds 65% will now be classified as long-term investments after 24 months. The previous holding period for these funds was 36 months. These will be taxed at the revised LTCG tax rate of 12.5%.
To Wrap It Up…
In conclusion, high-risk, high-return mutual funds present investors with a unique set of opportunities and challenges. While the potential for significant returns exists, it is crucial for investors to approach these funds with a clear understanding of their risk tolerance, investment goals, and the intricacies of the funds themselves. As discussed earlier, the tax implications add another layer of complexity that necessitates careful consideration.
As always, please do your own research and/or consult a financial advisor before investing.
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Frequently Asked Questions (FAQs) on High Risk Mutual Funds
The investment horizon for high risk mutual funds typically ranges from 5 to 10 years or more. Investors should comprehend both the growth potential and challenges before investing in the best high risk mutual funds.
The specific asset allocation will vary depending on the type of high-risk mutual fund, but these funds generally invest in riskier assets with the potential for higher returns.
High risk high return MFs have the potential to offer good returns than lower-risk funds, but they may also come with a higher degree of risk. The returns on high risk mutual funds can vary significantly from year to year, and investors should be prepared for the possibility of losses.
High risk mutual funds can be suitable for investors with a long-term investment horizon and a high risk tolerance. However, these funds might not be appropriate for investors who need to access their money in the short term or who are uncomfortable with the possibility of significant losses.
Some high risk mutual funds have lock-in periods, which means that investors cannot redeem their shares for a certain period of time.
