Best High Returns Portfolio

You may consider constructing a high returns portfolio if you are an aggressive investor. It could put money in medium and small-sized companies to generate a higher return than a conservative portfolio. However, you must be willing to bear a higher risk for the extra return. 

You can invest in a high returns portfolio if you are willing to stay invested for the long run. It helps if you can pick the right mid-cap, small-cap, Flexi-cap and sector funds for your portfolio based on investment objectives.

You may consider investing in large-cap funds, index funds and ELSS as part of your core portfolio. You can invest in mid-cap and small-cap funds, thematic funds, sector funds and Flexi-cap funds as part of your satellite portfolio. It helps you increase the overall return from your portfolio.

Who should invest in a high returns portfolio?

You can consider a high returns portfolio if you are an aggressive investor with a high-risk tolerance and an investment horizon of over 10 years. It helps you achieve your long-term financial goals, such as buying a house. 

You may consider opting for a high-risk portfolio if you can bear extreme market volatility for inflation-beating returns over some time. It helps if you are younger with a longer time horizon and understand the stock market.

How to construct a high returns portfolio?

You have focused mutual funds that put money in a maximum of 30 stocks as per SEBI rules. It is a concentrated portfolio that offers you a higher return as compared to many equity mutual funds. However, it’s a risky investment as it puts money in a maximum of 30 stocks compared to 50-100 stocks for other equity funds. 

You have focused funds able to invest in stocks of companies across market capitalisation and sectors. It is similar to Flexi-cap funds but with a lesser number of shares in its portfolio. You will find focused funds vulnerable to concentration risk as compared to diversified equity funds. 

You may include mid-cap and small-cap funds that invest in stocks of medium and small-sized companies in your high returns portfolio. You could also consider Flexi-cap funds that invest in stocks of small, medium and large-sized companies. 

You could invest in sector funds to earn a higher return if you can time the entry and exit of your investment. It puts money in stocks of only one sector. However, you may invest in sector funds only if you have a thorough knowledge of the particular industry. 

You can choose to invest in equity funds as part of your core and satellite portfolio. For example, large-cap funds, index funds, and ELSS may form part of your core portfolio. It lends stability to your portfolio. However, Flexi-cap funds, mid-cap and small-cap funds, sector funds, and thematic funds form part of your satellite portfolio and enhance your portfolio’s overall returns. 

What is alpha and beta in a mutual fund portfolio?

You can use alpha and beta to analyse the return and volatility of your high returns portfolio. You have beta showing your portfolio’s volatility compared to a market index such as the Nifty 50. 

A beta of one signifies that your equity mutual fund portfolio’s volatility matches the benchmark index. However, a beta above one shows that your portfolio is more volatile as compared to the market. A beta below one signifies that your portfolio is less volatile as compared to the benchmark index. 

You may consider investing in high-risk funds if you are an aggressive investor. You will find high-risk portfolios having a beta of more than one. However, it has the potential to offer you market-beating returns over some time. 

You have alpha measuring the portfolio return as compared to a benchmark index. A positive alpha shows that your mutual fund portfolio has yielded a return above the benchmark index. In a nutshell, an aggressive investor prefers a high beta and high alpha for the portfolio to enjoy a higher return during periods of upside volatility.