Best High Return Mutual Funds 2025
List of the high-return mutual funds with their AUM and Expense Ratio.
What are High Return Mutual Funds?
High-return mutual funds are schemes that have historically provided higher returns than their peers and the benchmarks. These funds usually bear extra risk by investing in the highest growth potential holdings, like small-cap or mid-cap stocks, in a bid to receive massive capital appreciation.
Long-term wealth creation can be achieved by investors using such funds. It should, however, be kept in mind that high returns are associated with high risk; thus, they are ideal for risk-tolerant investors with long-term investment horizons.
Advantages of Investing in High Return Funds
- Wealth Creation: The key benefit is the possibility of high capital growth in the long run, enabling individuals to reach long-term objectives at a quicker pace.
- Beat Inflation: These funds are capable of generating returns comfortably higher than the inflation level, keeping and growing your real wealth.
- Professional Management: Your money is professionally handled by experienced fund managers skilled in the identification of high growth potential.
- Exposure to Growth Sectors: They provide exposure to fast-growing companies and sectors of the economy that may not be available in large-cap funds.
Limitations of High Return Funds
- High Volatility: The value of these funds can fluctuate significantly in the short term due to market movements.
- No Guaranteed Returns: Unlike fixed deposits, mutual funds do not offer guaranteed returns, and there is a risk of capital loss.
Who Should Invest in High Return Funds?
- Long-term Investors: These funds are appropriate for long-term investors (having a 5+ year investment horizon), because they can bear short-term market movements.
- Aggressive Risk Takers: These funds, to produce high returns, are of high risk. They are suitable for investors who are comfortable with the possibility of market fluctuations.
- Goal-Based Investors: These funds can be a highly helpful tool if you are working towards long-term goals like retirement, your kid's education, or generating wealth.
Frequently Asked Questions
What are High Return mutual funds?
High return mutual funds are not a separate SEBI category but a classification based on performance. They are typically equity-oriented schemes, such as small-cap, mid-cap, or sectoral/thematic funds, that focus on companies with strong growth prospects.
The primary objective of these funds is to generate maximum capital growth. Fund managers achieve this by identifying and investing in stocks that have the potential to outperform the broader market, which often involves higher volatility.
Why do High Return mutual funds give much better returns than others?
High Return mutual funds often deliver better returns because they invest in faster-growing companies, emerging sectors, or higher-risk market segments like mid and small caps. These areas have greater growth potential, so when the market performs well, these funds can generate significantly higher gains than more conservative categories.
Are High Return mutual funds suitable for new or conservative investors?
High Return mutual funds are generally not suitable for new or conservative investors because they can fluctuate sharply in the short term. These funds work better for experienced investors with a higher risk appetite and a long-term horizon, who are comfortable handling bigger ups and downs for potentially higher returns.
What should be the ideal allocation of High Return mutual funds within my portfolio?
An ideal allocation to High Return mutual funds depends on how much volatility you can handle. Many investors limit them to 10 to 20 percent of their equity portfolio because these funds can fluctuate sharply. If you have a high risk appetite and a long-term horizon, you can consider allocating on the higher end of that range.
Why do funds in the High Return mutual funds category keep changing?
Funds in the High Return category keep changing because performance varies as market conditions shift. A fund that performs well in one cycle may slow down in another, allowing other funds to take the lead. Since these funds invest in high-growth and high-volatility segments, their rankings and returns can change more frequently than traditional equity funds.
How to choose the right High Return mutual Fund?
To choose the right High Return mutual fund, look for funds with a consistent long-term track record rather than just recent high performance. Check the fund manager’s experience, how the fund performs across market cycles, and whether its risk level matches your comfort. Also review the portfolio mix, expense ratio, and how it compares to its benchmark before investing.
Why are High Return mutual funds riskier than the average mutual fund?
High Return mutual funds are riskier because they usually invest in more volatile areas like mid caps, small caps, or aggressive sectors. These segments can deliver strong growth but also experience sharper ups and downs during market swings, which increases the overall risk compared to the average mutual fund.
What additional risks should I be aware of when investing in High Return mutual funds?
High Return mutual funds come with additional risks because they often take bigger exposure to volatile sectors, mid caps, or small caps. They can see sharp short-term swings, face higher liquidity risk during market stress, and may underperform significantly if the high-growth segments they invest in go through a slowdown.
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