Tips to Invest in High Returns Mutual Funds
Everyone wants to achieve financial freedom and grow money. But risk-taking ability varies from person to person. Risk and return go hand in hand. The higher the risk, the higher is your investment return. You can expect high returns only from market-linked investments like direct equity and equity-oriented mutual funds. The latter is the most preferred investment for capital appreciation as it can deliver high returns and also can diversify your investments.
Mutual funds are undoubtedly one of the best investment vehicles for getting high returns on your hard-earned money. There is a wide variety of equity mutual funds available from multiple Asset Management Companies which makes it difficult to make an investment decision. Here are a few tips for you to invest in high-return mutual funds in India.
Tips to Invest in Best High Return Mutual Funds
There are many prominent benefits of investing in mutual funds such as diversification, professional management of your money, flexibility, liquidity, well-regulated investment, convenience, and the potential to deliver higher returns. Equity-oriented mutual funds come in many varieties suitable for moderate to aggressive investors. For higher returns that are suitable for your needs, you need to make the right fund choice. Let’s take a look at some of the important tips to invest in the best high return mutual funds:
Keep a long-term perspective: When you are investing in market-linked products like equity mutual funds, it is important to keep a long-term perspective. Depending on the market condition and the volatility, the performance of funds may vary. Sometimes even in a short term, a fund can deliver you high returns. But investing should be done based on your investment goals, time horizon, and risk-taking ability. Equity as an asset class is considered to deliver a greater return over the long run. Hence, have a long-term outlook for your mutual fund investments.
Choose the right fund category: There are many categories of equity mutual funds available, each with a varying risk-return profile. Large-cap, mid-cap, small-cap, multi-cap, sectoral funds, thematic funds, fund of funds and international funds, etc. Choose the fund that fits into your risk profile. For example, if you are a highly aggressive investor, you can take a higher risk by investing in a sectoral fund that focuses on only one sector. You need to study the funds, how each category of fund works, risk-return profile, etc before you decide. You can also take the help of experts in getting investment advice. Small-cap funds have the potential to deliver higher returns, but large-cap funds are more consistent as they are a portfolio of bluechip stocks.
Start investing early: If you are expecting a high return, you need to invest in high-risk mutual funds. This means you need to have a high-risk appetite. Hence, you need to start investing early at a young age, wherein you can take high risks due to lower responsibilities. Though you may not be able to invest lump sum money, you can take a systematic investment plan route to invest in equity mutual funds. SIP is the best way to achieve higher returns at reduced risk over the long term.
Performance: While investing in high-return mutual funds, you need to make a thorough study of funds. You need to consider the historic performance of the funds to understand how the fund performs in different market situations. Consistency of return, underlying holding of the fund’s portfolio, sectors in focus, investing style, and the fund’s objective are all important considerations to make the best investment decisions. You need to consider the cost or expense ratio of the funds along with exit loads if any. A lower expense ratio can result in higher returns on your investment. The cost associated with the fund has a significant impact on the fund’s returns in the future. A comparative study can help you decide the right mutual fund for you.
Best High Return Mutual Funds
|Fund Name||Returns||Expense Ratio|
|ICICI Prudential Technology Fund||77.70%||65.59%||44.96%||0.76%|
|Aditya Birla Sun Life Digital India Fund||68.27%||59.99%||42.41%||0.88%|
|Tata Digital India Fund||76.36%||61.03%||43.99%||0.41%|
|Motilal Oswal Nasdaq 100 FOF||30.53%||38.39%||NA||0.10%|
|PGIM India Midcap Opportunities Fund||50.34%||52.74%||32.54%||0.32%|
Fund manager’s track record
Not all fund managers can perform the same way. Hence, it is important to consider the performance track record of the fund manager while choosing the high return mutual funds. Fund’s performance depends on the decision-making ability of the fund managers.
Ultimately, investment decisions are completely dependent on your financial goals. If you are investing for long-term goals, you can invest in any fund that has been consistently performing well in the market. Over the long run, equity funds deliver inflation-adjusted returns. You need to first define your goals, investment requirements, evaluate your risk profile, and understand the time frame you have for achieving your goals so that you can make the best choice.