Low-risk mutual funds are investment vehicles that aim to provide stability and preserve capital while offering modest returns. These funds typically invest in securities that have lower volatility and are less sensitive to market fluctuations.
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AUM ₹17657 Cr •
Expense 0.39%
AUM ₹53683 Cr •
Expense 0.43%
AUM ₹12233 Cr •
Expense 0.38%
AUM ₹11672 Cr •
Expense 0.29%
AUM ₹31103 Cr •
Expense 0.42%
AUM ₹5529 Cr •
Expense 0.31%
AUM ₹15258 Cr •
Expense 0.38%
AUM ₹6876 Cr •
Expense 0.37%
AUM ₹2773 Cr •
Expense 0.21%
AUM ₹12503 Cr •
Expense 0.29%
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Capital Preservation
The primary goal is to protect the invested principal amount.
Steady Income
These funds often provide regular, albeit modest, income through interest or dividends.
Lower Volatility
They exhibit less fluctuation in value, making them suitable for conservative investors.
Liquidity
Many low-risk mutual funds offer high liquidity, allowing investors to access their money with minimal delay.
Lower Returns
Low-risk mutual funds generally offer lower returns compared to higher-risk investments such as equities or high-yield bonds. This conservative approach aims to preserve capital and provide stability, but it often means that the returns are modest. Investors looking for significant growth may find these returns insufficient to meet their long-term financial goals or to outpace inflation over time.
Inflation Risk
One significant limitation of low-risk mutual funds is their vulnerability to inflation risk. The returns generated by these funds may not always outpace inflation, especially in a high-inflation environment. This can erode the purchasing power of the invested capital, making it challenging for investors to maintain their standard of living or achieve their financial objectives.
Interest Rate Sensitivity
Low-risk mutual funds, particularly those investing in bonds, are sensitive to changes in interest rates. When interest rates rise, the value of existing bonds typically falls, leading to a decline in the fund's value. This interest rate risk can negatively impact the fund's performance, especially during periods of rising rates, causing potential losses for investors.
Credit Risk
Although considered low-risk, these funds are not entirely free from credit risk. They may invest in corporate bonds or other non-government securities, which carry the risk of issuer default. If a bond issuer fails to meet its obligations, the value of the fund can decline, resulting in potential losses for investors, even in a low-risk fund.
Limited Capital Appreciation
Low-risk mutual funds focus primarily on income and capital preservation rather than significant capital appreciation. This conservative investment strategy limits the potential for substantial growth, making these funds less suitable for investors seeking higher returns over the long term. The limited capital appreciation may not suffice for achieving aggressive financial goals.
Expense Ratios
Even though low-risk mutual funds tend to have lower expense ratios compared to more actively managed funds, these fees can still reduce the overall returns. Management and administrative costs, though modest, can eat into the income generated by the fund, particularly in a low-yield environment, thereby diminishing the net returns available to investors.
Investment Goals
Before investing in low-risk mutual funds, it's crucial to clearly define your investment goals. Consider whether your primary objective is capital preservation, generating steady income, or achieving modest growth. Low-risk mutual funds are ideal for conservative investors looking to safeguard their principal while earning a stable, albeit lower, return. Ensure that these funds align with your overall financial strategy and are suitable for your investment horizon, especially if you have short-term goals or need liquidity.
Risk Tolerance
Understanding your risk tolerance is essential when considering low-risk mutual funds. These funds are designed for investors who prefer minimal risk and are comfortable with lower, more predictable returns. Assess how much risk you are willing to take and whether you can tolerate potential fluctuations in value, even if they are typically minor compared to higher-risk investments. Your comfort level with risk will help determine if low-risk mutual funds are the right choice for your portfolio.
Fees and Expenses
Review the fees and expenses associated with low-risk mutual funds before investing. Although these funds generally have lower expense ratios compared to actively managed funds, management fees and administrative costs can still impact overall returns. It's important to compare the expense ratios of different funds and understand how these costs will affect your net returns. Paying attention to fees ensures that you maximize the efficiency of your investment and select funds that provide the best value for your money.
Now that you have understood what Low Risk Mutual Funds are, you need to know how easily you can start your investment with INDmoney. Just follow these simple steps given below, to start your mutual fund investment journey with us.
Step 1
Download the INDmoney app and create your free investment account by completing your KYC (Know Your Customer).
Step 2
Once your free investment account is ready, you can either search for a Low Risk Mutual Fund or go to the mutual fund section and tap on Fund of Funds from Discover All Categories.
Step 3
Choose a Low Risk Mutual Fund by looking at aspects like past returns, volatility, downside capture ratio, AUM, expense ratios, and underlying stocks and sectors.
Step 4
You can choose to set up a SIP in a Low Risk Mutual Fund or even invest as a lump sum. Once you are on the individual Low Risk Mutual Fund page, click from the bottom “One-time” for lump sum investment or “SIP” for a systematic investment plan.
Step 5
Choose the amount that you want to invest as SIP or Lump Sum.
Step 6
Set up payments. If you choose to set up SIP in a Low Risk Mutual Fund, you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lump sum (one-time) then you can pay via UPI, net banking, NEFT, or RTGS.
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