9 specialised mutual funds for investors with high-risk appetite
Global funds invest in mutual funds/Exchange-traded funds which invests in companies that have footprints across the world
As a mutual fund investor, you can gain a good return, especially investors with a high-risk appetite. Mutual funds in India are classified into various categories based on investment objectives, strategy, and risks. Few specialised funds require you to have high risk as these funds bet on international markets and various sectors. Let’s take a look at these funds:
1. Index funds
These are the funds that invest in a specific index. Here the fund mirrors the performance of that particular index. Further, the stocks constitute investments that are identical to that of the particular index. Many experts believe that a direct plan would be more cost-effective while buying index funds as it will only have an expense ratio. While in the case of going through the regular plan route, you will have to incur both expense ratio and transaction charges.
2. Sectoral funds
Sectoral funds fall under equity-oriented mutual funds. They are based on the themes which invest in a particular sector that delivers a good return. For instance, as per the Value Research data, the technology sector-based fund has given a return of around 80% in the last one year as of November 7, 2021.
One crucial point is that investments into sector funds carry a much higher risk than normal diversified funds. Therefore, exposure should be initiated after careful study and consultations with professional advisors.
3. Global funds
Global funds allow you to have exposure in international markets. That said, global funds invest in mutual funds/exchange-traded funds, which invest in companies that have footprints across the world.
4. Fund of funds
Under fund of funds, the fund manager invests in one fund that makes the investment in several other funds. There are various FoFs that include domestic FoFs, global FoFs, and ETFs based FoFs. That said, a particular FoF may invest in schemes managed by the same fund house or by another fund house.
The portfolio is constructed to meet the needs of investors with a range of risk tolerances and financial objectives. As a result of investing in various fund categories, investors gain the potential to benefit from diversification.
5. International funds
These are the funds that make investments in companies situated outside the investor’s residence country. Further international funds have the characteristic of giving good returns, especially when the equity markets are performing well.
6. Real estate funds
This fund invests in some of the high-quality real estate directly or in the companies that purchase real estate. The funds come with a high risk that offers long-term returns.
7. Exchange-traded funds (ETFs)
Exchange-traded funds (ETFs) are mutual funds traded on the stock market, like stocks and shares of publicly traded corporations. Exchange-traded funds, or ETFs, often track an underlying index as their benchmarks, such as gold, PSU banks, Sensex, or Nifty.
The fund manager’s job is to acquire and sell equities in accordance with the performance of the underlying index with the least amount of tracking error possible. Exchange-traded funds (ETFs) seek to replicate the index they track, and because they require no involvement from the fund manager, they are termed passively managed funds.
8. Emerging market funds
The last year has witnessed many fund houses launching emerging market funds. These are the funds that place their bets, especially on developing markets.
This fund is suitable for investors looking to invest in units of mutual funds that invest in companies around the emerging markets.
As per the fund manager, investing in emerging markets remains attractive as there is no limitation on a sector or region. High economic growth, innovative technology, increase in consumption all stand in favour of an emerging market.
9. HDFC Developed world indexes fund of funds
The fund is the first of its kind, launched in October 2021. It provides exposure to five regions across 23 developed markets, 1500+ constituents, and 14 currencies with coverage of approximately 56% of global GDP and approximately 50% of world market cap in one single fund.
The fund has been launched in association with Credit Suisse Asset Management, the global asset manager who holds $510 billion in assets under management. The fund will cater to investors seeking to diversify their holdings and capitalise on opportunities in the developed world.
Further, the fund will invest in Credit Suisse Index Funds or ETFs to track the MSCI World Index in aggregate. The fund falls under the ‘Very High’ risk category of the mutual fund, and therefore the investors should consult their advisors to check the product suitability.