Factors to Consider Before Investing in Aggressive Mutual Funds
1. Assess the Risks and Returns: Aggressive Funds are considered moderately-high risk investments due to their equity exposure of 65-80%. The risks associated with aggressive funds are fewer than those of a pure equity fund since they have a 20-35% exposure to debt securities and money market instruments. Furthermore, the inclusion of small-cap equities in the equity portfolio or low-quality debt securities might enhance investment risk. Returns are proportional to the portfolio’s stock and security selection.
2. Expense Ratio: Aggressive funds charge a fee for the fund management services they provide. This is referred to as an expense ratio. A higher expense ratio might reduce profitability. As a result, you should look for schemes with low expenditure ratios. Furthermore, if the scheme has a high level of trading activity, the expenditure ratio will be high due to increasing expenses. Keep this factor in mind while choosing a scheme.
3. Selecting the Right Aggressive Fund: Before you begin looking at the different aggressive funds available, you should examine your financial goals, risk tolerance, and investment horizon and develop an investing strategy. This will allow you to select the plan that fits best with the rest of your financial portfolio to help you achieve your goals.
4. Aggressive Fund Taxation: Aggressive funds are taxed in the same way as equity funds, with the following tax rules:
- Long-term capital gains (LTCG) of more than â‚ą1 lakh are taxed at 10%, irrespective of indexation.
- STCG (short-term capital gains) are taxed at 15%.