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List of Low Risk Mutual Funds in 2023
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All Mutual fund investments are subject to risk. Each fund, however, will have a different level of risk associated with them – Low risk, moderate risk, high risk etc.
This is communicated through product Labeling for every mutual fund through its risk-o-meter. It depicts the risk level of a scheme. Low risk funds are investment options with minimal risk when compared to high risk equity schemes.
Low risk funds are majorly debt funds that invest across government schemes, money market instruments, etc. This article covers low risk mutual funds, their features and who should invest in them.
Top 5 Mutual Funds with Lowest Risk in 2023
| Fund Name | Return Since Inception | Expense Ratio |
| Nippon India Arbitrage Fund | 6.8% | 1.05% |
| HDFC Overnight fund | 5.8% | 0.2% |
| SBI Overnight Fund | 6.5% | 0.18% |
| Kotak Equity Arbitrage Fund | 6.8% | 1.01% |
| Axis Arbitrage Fund Growth | 5.5% | 1.05% |
What are Low Risk Mutual Funds?
Low risk mutual funds offer more or less stable returns. However, this doesn’t mean that the schemes are risk-free. Low risk funds offer higher returns and are comparatively more tax-efficient than traditional investments like fixed deposits. Therefore, the schemes are suitable for risk-averse investors.
Debt funds are low risk mutual funds that invest in money market instruments, government bonds, etc. As a result, the risk associated with these instruments is lower. There are multiple schemes under the debt funds category. Some of which are liquid funds, dynamic bond funds, gilt funds, ultra-short-term funds, etc.
Debt funds normally come with some amount of interest rate risk and credit risk. However, investing in higher rated bonds will help in addressing the associated risk.
Since these funds carry minimum risk and aim to offer optimal returns, they are a good option to park idle money for short durations.
Features of Low Risk Funds
Following are the features of Low Risk Mutual Funds:
- Risk Reward Ratio: Low risk funds invest in high rated securities. Though they are not risk-free, they offer optimal returns. In comparison to equity mutual funds, you do not have to worry about market volatility. For short durations, low risk funds are an ideal option for investment.
- Asset Allocation: Low risk funds primarily invest in debt instruments. Therefore, the schemes offer optimal returns. Their asset allocation is across government bonds, T-bills, debentures, money market instruments, etc. The fund managers carefully assess different securities and choose the ones with good credit ratings and historical returns.
- Types of Funds: Low risk funds have multiple schemes that serve different investment purposes. Liquid funds, ultra-short-term funds, gilt funds, dynamic bond funds are some of the types of low risk funds. Therefore, depending on your investment objective and goal, you can choose a suitable scheme for investment.
- Investment Duration: Low risk mutual funds are short term investment options. Since the schemes invest in high rated and government securities, the returns are more or less stable.
- Investment Objective: The objective of low risk funds is to generate optimal returns with capital protection.
- Tax Efficient: Investors in the highest tax bracket can invest in low risk mutual funds rather than bank deposits to save tax. One can enjoy the tax benefit in the long term, as debt fund investments offer indexation benefits.
Who Should Invest in Low Risk Mutual Funds?
- Low risk funds have low volatility. Therefore, they are suitable for investors who have low risk tolerance levels or have objectives that need low volatility.
- Investors who have a short term investment horizon (3 years or less) and who wish to avoid market volatility can invest in low risk funds.
- Low risk funds are suitable for investors who wish to invest their idle cash for a short period of time. These schemes are an excellent alternative to a savings bank account.
- With a variety of schemes under the low risk category, investors can choose funds that align with their investment objective.
Explore Funds by Category
I'm an enthusiast with a demonstrable knowledge of investment and financial planning. To establish my expertise, I'll provide information related to the concepts mentioned in the article:
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Investment Plans: Investment plans refer to strategies individuals use to allocate their money with the aim of generating returns. These can include various financial instruments such as stocks, bonds, mutual funds, and real estate.
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Wealth Plans: Wealth plans involve long-term financial planning to accumulate and preserve wealth over time. They often encompass a diversified portfolio of investments.
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Long Term Portfolio: A long-term portfolio typically includes investments with the goal of achieving substantial growth over an extended period, often through equity funds.
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Emergency Fund: An emergency fund is a readily accessible savings reserve that individuals maintain to cover unexpected expenses or financial emergencies without the need for borrowing or selling investments.
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Tax Saver Plan: Tax saver plans, often known as Equity-Linked Savings Schemes (ELSS), are investment options that provide tax benefits under section 80C of the Income Tax Act while also allowing for potential growth through equity investments.
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Short Term Portfolio: A short-term portfolio comprises investments with a shorter investment horizon, often focused on preserving capital or meeting immediate financial goals.
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Cash Management: Cash management involves optimizing the use of available cash and short-term investments to meet financial obligations and maximize returns while ensuring liquidity.
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Goal-Based Plans: Goal-based plans involve structuring investments to achieve specific financial goals, such as retirement planning, education funding, or buying a house.
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Dream Planner: A dream planner is a tool or strategy used to create a financial roadmap for achieving one's dreams and aspirations, whether it's traveling, buying a home, or starting a business.
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Mutual Funds: Mutual funds are investment vehicles that pool money from multiple investors to invest in diversified portfolios of stocks, bonds, or other securities.
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US Stocks: Investing in U.S. stocks involves buying shares in American companies listed on stock exchanges like the New York Stock Exchange (NYSE) or NASDAQ.
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ETFs (Exchange-Traded Funds): ETFs are investment funds that are traded on stock exchanges, representing a diversified portfolio of assets, similar to mutual funds but with the flexibility of trading like individual stocks.
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Mutual Fund NAV (Net Asset Value): NAV represents the per-unit market value of a mutual fund's assets minus liabilities, calculated at the end of each trading day.
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Mutual Fund ISIN Number: The ISIN (International Securities Identification Number) is a unique code that identifies a specific mutual fund scheme. It's used for tracking and trading purposes.
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Category (in Mutual Funds): Mutual funds are categorized based on their investment objectives and asset allocation, such as equity funds, debt funds, hybrid funds, and more.
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Best Mutual Funds: These are funds that have demonstrated strong performance and are often recommended by financial experts or advisory services.
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AMC (Asset Management Company): AMCs are firms that manage and operate mutual fund schemes, making investment decisions on behalf of investors.
This information covers the concepts mentioned in the article related to investment and financial planning, providing a foundation for understanding the content.
