The low risk mutual funds are the best options if you look for a stable return involving lower risk. The investment tools are suitable for people with a low-risk appetite
But an assured stable return. The mutual funds consist of a mixed equity, debt, and gold allocation to keep the risk low. The funds are focused on generating decent returns while mitigating any associated risk, and it is a good short term investment option.
The guide includes 15 low-risk mutual funds you can invest in to gain a stable return involving minimum risk.
Also Read: Quant Multi-Asset Funds, Tata Arbitrage Fund & TRUSTMF Overnight Fund
Low Risk Mutual Funds (2022)
1. Quant Multi-Asset Funds
The fund was launched on 01/01/2013 and is managed by Quant Mutual Fund. The fund has 73.02% of equity and 8.60% debt allocation.
It has an expense ratio of 0.56%.
This is one of the best low risk high return mutual funds.
Features
2. Tata Arbitrage Fund
The fund was first launched on 10/12/2018 by Tata Mutual Fund, and it consists of 0.21% of the allocation to equity and 26.83% to debt.
The expense ratio is 0.30%.
Features
3. TRUSTMF Overnight Fund
The TRUSTMF funds are debt funds, and it is an investment in bonds with a maturity of one day.
The mutual fund invests in debt securities and is an excellent liquid investment security. The expense ratio is 0.07%.
Features
4. ICICI Prudential Equity and debt fund
It is an Aggressive Hybrid mutual fund scheme with 68.66% equity and 21.33% to debt.
The fund has an expense ratio of 1.25%.
Features
5. Edelweiss Aggressive Hybrid Fund
The fund consists of an equity allocation of 68.86% and a debt allocation of 13.31%.
The fund has an expense ratio of 0.51%.
Features
6. Baroda BNP Paribas Aggressive Hybrid Fund
The mutual has an equity allocation of 73.21% and debt allocation of 22.08%.
The expense ratio of the fund is 0.64%.
Features
7. HSBC Overnight Fund
The mutual fund invests in debt securities to overnight maturities.
It has the risk free mutual funds and an expense ratio of 0.11%.
Features
8. Canara Robeco Equity Hybrid fund
The mutual has an equity allocation of 71.15% and debt allocation of 19.20%.
The expense ratio of the fund is 0.64%.
Features
9. Mirae asset overnight fund
The mutual fund invests in debt securities to overnight maturities.
It has the lowest risk and an expense ratio of 0.13%.
Features
10. BOI AXA Overnight Fund
These are overnight debt funds invested in debt securities with overnight maturities.
The expense ratio is 0.10%.
Features
11. SBI Multi-Asset Allocation Fund
The mutual fund has 43.17% equity allocation and debt allocation of 23.51%.
The expense ratio of the fund is 0.87%.
Features
12. Axis Triple advantage fund
The mutual fund has 74.10% equity allocation and debt allocation of 15.40%.
The expense ratio of the fund is 0.53%.
Features
13. DSP Dynamic Asset Allocation Fund
The mutual fund has 39.67% equity allocation and debt allocation of 30.59%.
The expense ratio of the fund is 0.69%.
Features
14. Franklin India Debt Hybrid Fund
The mutual fund has 23.35% equity allocation and debt allocation of 69.28%.
The expense ratio of the fund is 0.55%.
Features
15. Kotak Debt Hybrid Fund
The conservative hybrid mutual fund has 24.71% equity allocation and debt allocation of 54.23%.
The expense ratio of the fund is 0.45%.
Features
Who Should Invest in Low-Risk Mutual Funds?
The low-risk mutual funds are suitable for investors with a low-risk appetite as the funds have low volatility and stable returns. It is recommended for investors with short term investment goals.
As the funds are a mix of equity and debt, it helps gain a steady return irrespective of the market volatility. These mutual funds are suitable for people with extra or idle liquid money who want to invest for a shorter period.
Most of the funds provide higher returns than the interest from the savings account. It is a good investment choice if you have a two or three-year goal for saving up for something.
Advantages of Low-Risk Mutual Funds
- Low risk - One of the most significant advantages of the funds is low risk and is not impacted by the market volatility. It generates stable income at low risk.
- Ideal for short term – The low-risk funds are good for achieving short term goals. It is good to invest idle or extra money in such instruments as returns higher than the bank interest rate.
- Higher returns compared to traditional tools – The low-risk mutual fund is better than fixed or recurring deposits as it provides higher returns.
- Tax saving – Some low-risk mutual funds are significant for tax saving in terms of long term capital gain.
Things to Consider before investing
- Risk reward ratio – This is a primary thing to consider while investing. Higher is the risk; higher is the rewards. Low is the risk, and lower but stable is the reward. The low-risk funds are ideal for short-term investment.
- Asset allocation – The higher the debt allocation, the lower the risk. Higher is the equity allocation; higher is the risk. Make sure that the low-risk funds have high debt instruments.
- Tax benefit – If the plan is for a short term and safe investment, it is best to invest in tax saving instrument.
- Duration – The low-risk funds are good for short term investments as returns are higher than bank interest or fixed deposits.
Taxation on Low-Risk Mutual Funds
The low-risk mutual funds offer tax benefits and are an excellent way to invest in tax savings. There are two types of taxation on the low-risk mutual funds:
- Long term capital gain tax – On selling or redeeming the fund amount after completion of 3 years, the returns on the mutual fund are taxed at 20% with indexation benefits.
- Short term capital gain tax = On selling or redeeming the fund amount before completion of 3 years, the returns on the mutual fund are taxed as per the income slab.
Conclusion
The low risk mutual funds are a great investment with a low-risk, stable reward ratio. The allocation of equity and debt is a great combination which helps stabilize the market volatility in the short term.
The above 15 low-risk mutual funds are a compilation of the best funds available in the market for short term investment to get stable returns.
The funds are managed by SEBI registered and highly experienced fund managers, and a considerable portion of the fund is allocated to debt instruments. This concludes that low-risk mutual funds are one of the safest investments.
frequently asked question
Q1. What is the safest mutual fund?
The low-risk mutual funds are the safest mutual funds in India because it has low risk and generates a stable return over some time. It is good for short term investment with a strong allocation of debt instruments, equity, and gold to beat the market volatility.
Q2. Which mutual fund has the lowest risk?
The debt funds are those which have the lowest risks. These are the mutual funds that invest at least 65% of the total in various debt securities like gold, government bonds, international funds etc.
The fund's debt instrument helps bring a stable return irrespective of the market.
Q3. What are the four types of mutual funds?
The four types of mutual funds are:
- Equity funds – These are highly volatile and risky but also have the potential to generate higher income. Investment is majorly in stocks.
- Debt fund – These funds are low risk but generate a stable return. The investment is majorly on debt securities like corporate or government bonds.
- Money market funds are short- term debt funds with investment in a liquid instruments like treasury bills, commercial papers, certificates of deposits, etc.
- Hybrid funds – These funds are a mix of debt and equity mutual funds with the allocation of 70% money in low-risk debt funds and 30% in equity.
Q4. Is Tata Mutual Fund Safe?
Yes, Tata Mutual Fund is safe. It is part of Tata Group, a renowned and reputed conglomerate. The AMC division of the TATA group was launched in 1994 and had a range of mutual funds managed by experienced fund managers.
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