Low Risk Mutual Funds

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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Best Low Risk Mutual Funds to Invest in India 2024

Fund Categories
AMC/Fund Houses
ICICI Prudential Asset Management Company LimitedHDFC Asset Management Co LtdSBI Funds Management LtdKotak Mahindra Asset Management Co LtdNippon Life India Asset Management LtdAditya Birla Sun Life AMC LtdAxis Asset Management Company LimitedUTI Asset Management Co LtdMirae Asset Investment Managers (India) Private LimitedDSP Asset Managers Private LimitedTata Asset Management LimitedBandhan Asset Management Company LimitedDSP Investment Managers Private LimitedHSBC Asset Management(India)Private LtdIDFC Asset Management Company LimitedCanara Robeco Asset Management Co. Ltd.Franklin Templeton Asst Mgmt(IND)Pvt LtdEdelweiss Asset Management LimitedQuant Money Managers LimitedInvesco Asset Management (India) Private LtdPPFAS Asset Management Pvt. LtdMirae Asset Mutual FundSundaram Asset Management Company LtdMotilal Oswal Asset Management Co. LtdMirae Asset Global Inv (India) Pvt. LtdBaroda BNP Paribas Asset Management India Pvt. Ltd.LIC Mutual Fund Asset Management LimitedPGIM India Asset Management Private LimitedDaiwa Asset Mgmt. (India) Pvt. Ltd.Mahindra Manulife Investment Management Pvt. Ltd.Fund PineBridge Mutual FundJM Financial Asset Management LimitedUnion Asset Management Co. Pvt. Ltd.Baroda Asset Management India LimitedPrincipal Asset Management Private LimitedWhiteOak Capital Asset Management LimitedBajaj Finserv Asset Management LimitedJPMorgan Asset Management India Pvt. Ltd360 ONE Asset Management LimitedEdelweiss Mutual FundBank of India Investment Managers Private LimitedITI Asset Management LimitedNavi AMC LimitedNJ Asset Management Private LimitedICICI Prudential Asset Mgmt.Company LimitedFranklin Templeton Asset ManagementIDBI Asset Management LimitedQuantum Asset Management Co Pvt. Ltd.Samco Asset Management Pvt LtdHelios Capital Asset Management (India) Private LimitedGroww Asset Management Ltd.Trust Asset Management Private LimitedTaurus Asset Management Company LimitedShriram Asset Management Co LtdZerodha Asset Management Private LimitedOld Bridge Asset Management Private LimitedING Investment Mgnt (India) Private Ltd.Baroda BNP Paribas Mutual Fund
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Benefits of Low-Risk Mutual Funds

  • 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.

Advantages of Investing in Low Risk Mutual Funds

  1. Capital Preservation
    • Description: The primary goal of low-risk mutual funds is to protect the principal investment. These funds invest in stable and secure financial instruments, minimizing the chances of significant losses.
    • Benefit: This is ideal for investors who cannot afford to lose their initial investment, such as retirees or those saving for short-term goals.
  2. Steady Income
    • Description: Low-risk mutual funds often provide a consistent stream of income through interest payments or dividends.
    • Benefit: This regular income can be especially useful for retirees or individuals seeking a reliable cash flow to cover living expenses.
  3. Lower Volatility
    • Description: These funds experience less fluctuation in their value compared to higher-risk investments like stocks or high-yield bonds.
    • Benefit: Lower volatility translates to more predictable investment performance, reducing stress and uncertainty for the investor.
  4. High Liquidity
    • Description: Many low-risk mutual funds, such as money market funds and short-term bond funds, offer high liquidity, allowing investors to access their money quickly and with minimal penalties.
    • Benefit: Investors can easily convert their holdings to cash, providing flexibility to meet unforeseen expenses or opportunities.
  5. Diversification
    • Description: Even within low-risk mutual funds, there is diversification across various securities, sectors, and issuers.
    • Benefit: Diversification reduces the impact of any single investment's poor performance on the overall portfolio, further lowering risk.
  6. Professional Management
    • Description: Low-risk mutual funds are managed by professional fund managers who conduct thorough research and manage the portfolio to optimize returns while minimizing risk.
    • Benefit: Investors benefit from the expertise and experience of professional managers, which can enhance the performance of their investments compared to managing them independently.
  7. Reduced Credit Risk
    • Description: Many low-risk funds invest in high-quality, investment-grade securities or government-backed instruments, reducing the likelihood of default.
    • Benefit: The reduced credit risk enhances the safety of the investment, making it a secure option for risk-averse investors.
  8. Tax Efficiency
    • Description: Some low-risk mutual funds, such as municipal bond funds, offer tax advantages. The interest income from these funds may be exempt from federal and sometimes state taxes.
    • Benefit: This can increase the investor's after-tax return, particularly for those in higher tax brackets.
  9. Simplicity and Accessibility
    • Description: Low-risk mutual funds are relatively straightforward and easy to understand. They are also widely available through various financial institutions.
    • Benefit: This accessibility makes it simple for investors to include low-risk options in their portfolios without needing advanced financial knowledge.

Limitations of investing in low risk mutual funds

  • 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.

Points to consider before investing in Low Risk Mutual Funds

  • 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.

How to Start Investing in Low Risk Mutual Funds with INDmoney

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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