The Best High Risk Mutual Funds of 2025 - a complete Guide
High risk mutual funds are investment funds that have the potential of higher returns since they invest in volatile stocks in the market such as small cap stocks, sector funds, or emerging markets. There is a high number of Indian investors who are actively exploring growth opportunities in 2025 with the equity markets bearing a healthy momentum particularly since economic recovery seasons and regulatory reforms. High risk mutual funds are applicable in the cases where the potential to gain a lot and loss a lot is acceptable to the individual that wants to create wealth.
These funds are of interest to aggressive investors with a longer investment horizon and they are able to withstand the volatility of the market. Since brands, fund houses and sector performances change, knowing the high risk options that have potential in 2025 can make a huge difference in the success of your portfolio.
Peoples also ask: what makes a mutual fund a high risk investment?
The risky funds tend to focus on the volatile areas small cap, mid cap, sector or thematic shares that are susceptible to market movements and macro economic changes.
What is the Workings of the High Risk Mutual Funds?
High risk mutual funds mainly deal with the assets that have uncertain returns with a high, though, uncertain, returns. These usually comprise small cap stocks, mid cap investments, industry investments (such as technology or pharmaceuticals) and thematic funds that concentrate on trends such as the digital transformation or development of infrastructure.
Even when it comes with price fluctuations, fund managers pick stocks and securities that are believed to have high growth potential. No matter how well such funds can give higher returns in the long term, they could experience severe corrections particularly during the declines.
Key Highlights
- Invest heavily in equity or equity based instruments.
- Greater volatility than balanced funds or debt funds.
- Appropriate to high risk investors.
- Targeted at capital appreciation in the long term.
Did you know?
Indian small cap funds have occasionally been able to perform 20 percent average annualised returns over 5 years, although negative years of up to 30 percent have also been experienced.
What Kind of High Risk Mutual Funds Are trending in 2025?
Some funding categories that will be of high risk to growth seekers in 2025 include:
Small Cap Funds
The funds invest mainly in those companies that are not among the top 250 in terms of market capitals.
Mid Cap Funds
They target small businesses with a size between 101 and 250, having a greater growth opportunity but at a relatively greater stability in comparison to small caps.
Sectoral or Thematic Funds
Focused on particular industries, like IT, pharma, or banking, or on particular investment themes, like ESG (environmental, social, governance), manufacturing, or digital infrastructure.
International or Emerging Market Funds.
Diversify investors to international stocks usually in swiftly expanding or risky economies.
Key Features
- An increase in equity allocation.
- Less resistant to market cycles.
- Sector trend driven performance indicators.
People Also Ask: Do only young investors invest in high risk mutual funds?
Although they are suitable to younger investors in long-term objectives, they can be taken into consideration by any investor who has high risk appetite and has the appropriate investment tenure.
What are the Favorable High Risk Mutual Funds in 2025?
A few of these funds are becoming popular among the Indian investors in 2025 and are supported by the track record and fund house reputation in the recent past. Here is a comparison:
| Fund Name | 3-Yr return (%) | 5-Yr return (%) | Fund category 50 | Expense ratio (%) | AUM (Cr) |
|---|---|---|---|---|---|
| Nippon India Small Cap Fund | 29.5 | 23.7 | Small Cap | 0.69 | 42480 |
| SBI Small Cap Fund | 32.0 | 25.1 | Small Cap | 0.92 | 24,610 |
| Axis Midcap Fund | 20.7 | 19.8 | Mid Cap | 0.58 | 18,700 |
| ICICI Prudential Technology Fund | 22.9 | 25.3 | Sectoral (Tech) | 1.01 | 10,430 |
| Mirae Asset Emerging Bluechip | 18.8 | 20.4 | Large and Midcap | 0.57 | 34,570 |
| Motilal Oswal Nasdaq 100 FOF | 16.3 | 19.1 | International0.526,080 |
*Data as available till Q1 2025
Pros
- Strong prospects of long-term returns.
- Prospects to enjoy economic megatrends.
- Broad diversification in terms of portfolio, emerging companies and industries.
Cons
- Both high volatility and low volatility in times of market decline.
- Temporary losses may be large ones.
- Needs to be closely monitored and reviewed.
Who is supposed to think of investing in risky Mutual Funds?
Some kinds of investors should be associated with the high risk mutual funds. The following is a list of what to look at to determine whether they fit your profile:
Suitable For
- Those who have at least 5 or 7 years of investment horizon.
- People who were ready to take market volatility and losses.
- People who had alternative investments to get stability.
Unsuitable For
- Retirees or people with short term financial objectives.
- Income-oriented conservative investors.
- Individuals who dislike changes in the portfolio values.
Key Factors to Evaluate
- Personal risk appetite
- Investment term
- Financial goals and targets
- Existing asset allocation
Expert Insight:
The max amount that financial planners suggest should be in the highest risk category of 10 to 15 percent of your mutual fund portfolio based on your age, income and obligations.
What Are the Major characteristics to consider a High risk fund?
These characteristics will be relevant in 2025 when choosing the most effective high risk mutual funds to meet your requirements:
- Stable long-term performance (not only the recent returns).
- Well-established and mature fund management teams.
- Fair cost ratio regarding risk-return trade-off.
- Good portfolio diversification in the fund.
- Fund house transparency and clarity.
Pros
- Out-performance opportunity as compared to mainstream funds.
- Poor association with mainstream indices of Nifty or Sensex.
Cons
- Is unable to perform poorly over a long duration in a wider market.
- Higher dependence on the judgement of fund managers.
Comparison of High Risk Mutual Funds to Moderate and Low Risk Mutual Funds.
The table below gives a crude comparison between categories that will be popular in 2025:
| Characteristic | High Risk | Moderate risk | Low risk |
|---|---|---|---|
| Examples | Small Cap, Sectoral, Large Cap, Hybrid Eq. | Debt, Liquid, Gilt | |
| Outlooked Returns | 15-25 percent or more | 10-15 percent | 5-7 percent. |
| Volatility | Very High | Moderate | Low. |
| Ideal Tenure | 5 or more years | 3-5 years | 1-3 years |
| Appropriate | Aggressive Investors | Balanced Investors | Risk Averse. |
People Also Ask: What is the safest investment in the high risk mutual funds?
Risk can be managed through Systematic Investment Plans or staggered entry as opposed to lump sum investment.
How to Remember in the Year 2025 when Investing in High Risk Mutual Funds?
Patience and discipline are required in high risk mutual funds. Before committing, think about the following aspects:
- Do not spend money that has been borrowed or through crisis.
- Review investment on a regular basis (at least annually)
- Get prepared to highs and lows of the market.
- Diversify (do not place all the money in one sector or in one scheme)
- Diversion Do not chase past performance and stay with the proven investment strategy.
Highlights
- Take into account taxation (equity funds are generally taxed at 10 percent long term on long term above [?]1 lakh gains)
- Long term compounding is more effective in more volatile investments.
- SIP or STP (Systematic Transfer Plan) assists in smoothing out purchase price.
Did you know?
In 2024, retail investor confidence in Indian growth stories has been reflected by a new record of SIP inflows into high risk equity funds of [?]18,700 crore/month.
Is It Possible to minimize the risk of these Funds?
Investors have the ability to use strategies to reduce the aggregate risk:
- Do not put all your high risk money on a single type of fund.
- Blend with medium and low risk funds to be more stable.
- Compare performance with the relevant benchmark rather than only with the absolute returns.
- Periodical rebalance related to target asset allocation.
Pros
- Less drawdowns in unfavourable market periods.
- Cycle smoothing portfolio experience.
Cons
- Diversification will reduce potential upside in case one of the sectors performs highly.
- Needs to keep up with the times and take actions.
Quick Recap - TLDR
- High risk mutual funds are prone to risky areas of the market or shareholders in order to receive bigger prizes, yet they are associated with large price variations.
- The favourites of 2025 are small cap, sector and international funds that have track record and experienced fund managers.
- Most applicable to the aggressive, long-term investors who are okay with ups and downs.
- The critical risk management tools include diversification, SIPs, and periodic reviews.
- Important factors to be considered before investing include fund house credibility, consistency and portfolio structure.
People Also Ask
Q1. Do high risk mutual funds make good in SIP investments?
SIPs do contribute to the factor of averaging volatility and therefore it is easier to invest an average amount in high risk funds on a regular basis and reduce market timing effects.
Q2. How does the average of high risk mutual funds compare in their returns?
According to history, these funds are capable of producing returns of 15 percent or more in the long term, and temporary declines of 20 percent or more in bad times.
Q3. Will I lose all my money in high risk mutual fund?
Although with diversified mutual funds, there are inconsiderable losses to capital, sharp falls are possible. The risk management is long term holding and diversification.
Q4. In which frequency should I be monitoring my high risk mutual funds?
It is also recommended to compare at least once per year or when the major market events take place to make sure that your assets are performing as planned and there are working to your advantage.
Q5. When then is the appropriate time to leave a high risk mutual fund?
Discuss leaving when your financial objectives are nearly achieved, fund has been racking up underperformance as compared to its benchmark, or your risk profile/profile has shifted.
Sources
- AMFI India
- Value Research Online, Moneycontrol.
