Mutual fund investment is an investor’s best friend in an uncertain market. But when an investor is looking to invest, they are spoilt for choice! There are close to 10,000 mutual funds in the market today, and there is great competition between fund houses to get you to invest in their funds. At this point, the investor needs to be smart and not fall for the siren calls of many marketing gimmicks.
When it comes to investment, risk and return are directly correlated. This means that the higher the level of risk, the higher the potential return. However, this also means a greater chance of losing money. A low-risk mutual fund is a good option for investors who are risk-averse or have a low tolerance for risk.
A low-risk mutual fund is a type of investment fund that invests in securities with a lower level of risk. This means there are lesser chances of losing money, but the potential return is also lower. This blog will look at the top low-risk mutual funds which might appeal to investors.
What is a low-risk mutual fund?
Mutual fund investment allows you to pool your money with other investors and then have a professional manager invest it in various securities, including stocks, bonds, and other assets.
Low-risk mutual funds in India are a type of investment fund that pools money from many investors and invests it in various securities, typically intending to earn a consistent return while minimizing risk. A low-risk mutual fund tends to invest in large, well-established companies with a history of paying dividends.
They typically have a lower expense ratio than other types of mutual funds. Discussed below are some features that govern mutual funds.
- Several features make low-risk, high-return mutual funds an attractive investment option for many people. One of the most important features is the risk-reward ratio. This ratio measures the potential return of an investment against the amount of risk involved. In general, the higher the risk, the higher the potential return. However, with low-risk funds, the potential return is often lower than with high-risk investments, but the amount of risk is also lower.
- Asset allocation is the process of spreading your investment across different asset classes to minimise risk. A well-diversified portfolio typically includes a mix of stocks, bonds, and cash.
- Another important characteristic to look for in a low-risk mutual fund is a strong track record. Past performance is not necessarily indicative of future results, but it can give you an idea of how the fund has performed in different market conditions. A fund with a strong track record is more likely to weather market volatility than one with a weak track record.
- Finally, fees and expenses are also important when choosing a low-risk fund. Funds with high fees and expenses can eat into your returns, so choosing a fund with low fees is important. By considering all of these factors, you can increase your chances of choosing a low-risk fund that meets your investment goals.
Top low risk mutual funds to invest
As we enter the second half of the year, it is always a good time to look at the market and see what is going on. Mutual funds have been on a roll in the last few years and continue to be a great option to consider.
Some best-performing mutual funds have provided excellent returns while being low-risk options. In this blog, we look at the best mutual funds to invest in and talk about them in brief.
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Quant multi-asset funds
Quant multi-asset funds are one of the best-performing mutual funds that offer a diversified portfolio of investments and a wide range of investment options. These funds are managed by experienced professionals who deeply understand the market.
They can provide a high degree of protection against market volatility and offer a consistent return on investment. Promising a return of 23.91% per annum with an expense ratio of 0.56%, Quant is amongst the top low-risk mutual funds.
Expense ratio: 0.56%
Return (per annum): 23.91%
It is a perfect choice for investors who are looking for capital appreciation with low risk investing. The fund follows a dynamic asset allocation strategy and invests in a mix of equity and debt instruments. The fund has a track record of delivering consistent returns and is suitable for investors with a moderate risk appetite.
Expense ratio: 0.51%
Return (per annum): 13.1%
It is one of the best mutual funds in India. The fund aims to provide investors with a steady income stream by investing in a mix of equity and debt instruments. The fund has a 5-year track record of outperforming its benchmark index, the Nifty 50. The fund has a low expense ratio of 0.88%, making it an attractive option for investors looking for a low-risk investment option.
Expense ratio: 0.64%
Return (per annum): 11.95%
There are many different types of mutual funds, but one of the best low-risk options is the Mirae asset hybrid equity fund. This fund invests in both stocks and bonds, which helps to reduce risk and volatility. Over the long term, this fund has outperformed the S&P 500 index, making it a great option for investors looking for a solid investment.
Expense ratio: 0.45%
Return (per annum): 11.91%
If you’re looking for a low-risk option, the Axis Triple Advantage Fund is a great choice. This fund invests in a variety of different asset classes, including stocks, bonds, and real estate, which helps to reduce risk. Additionally, the fund has a strong track record of performance, outperforming the market in both up and down years.
Expense ratio: 0.58%
Return (per annum): 11.05%
It is a low-risk mutual fund that invests in a mix of debt and equity instruments. The fund aims to provide stability and capital appreciation by investing in a portfolio of high-quality debt and equity instruments. If you are a moderate risk appetite individual, this mutual fund is a good option.
Expense ratio: 0.45%
Return (per annum): 9.74%
List of Best Performing Low Risk Mutual Funds:
| Mutual fund | Current value |
| Quant Multi-asset Funds | Rs. 1.08 lakh |
| Edelweiss Balanced Advantage Fund | Rs. 83,311 |
| Canara Robeco Equity Hybrid Fund | Rs. 80,970 |
| Mirae Asset Hybrid Equity Fund | Rs. 80,901 |
| Axis Triple Advantage Fund | Rs. 79,179 |
| Kotak Debt Hybrid Fund | Rs. 76,645 |
*as of June 19, 2022
Benefits of best low-risk mutual funds
Mutual funds are funds formed by a pool of investors who pool money and invest in securities to make more money. In this blog, we will cover the reasons why you should consider them and how you can make a wise choice.
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Achieving short–term monetary objectives
There are many benefits to investing in a low-risk mutual fund, especially when it comes to achieving short-term monetary objectives.
For one, low-risk mutual funds tend to be more stable than other types of investments, meaning that they are less likely to experience sudden changes in value. This can help ensure you reach your financial goals without worrying about market volatility.
Additionally, a low-risk mutual fund typically offers higher returns in a short period than other types of investments, so you can grow your capital more quickly.
Finally, a low-risk mutual fund can provide peace of mind, knowing that your money is in a relatively safe investment.
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Regular source of income
Mutual funds are one of the most popular investment options available today. They offer several benefits, including the potential for regular income.
One of the main advantages of mutual funds is that they can provide you with a regular source of income. This is because many funds pay out dividends regularly. Dividends are a portion of the fund’s earnings paid to investors.
Another benefit of mutual funds is that they offer professional management. This means you don’t have to worry about picking individual stocks or managing your portfolio. Instead, you can leave it up to the experts.
They are also diversified, which means that they spread your money across several different investments. This diversification can help protect you from losses in any particular investment and help you earn regularly.
Overall, mutual funds offer many benefits, making them a popular choice for investors. If you are looking for a regular source of income, they may be a good option for you.
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Tax-efficient investment system
This means that your investment will be subject to fewer taxes, saving you money in the long run. Additionally, a low-risk mutual fund tends to be more stable than other types of investments, which means you are less likely to lose money in a market downturn.
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More return in comparison to FDs
In contrast to other investment options such as fixed deposits (FDs), low-risk mutual funds offer a higher return. For investors looking for a safe and stable investment option with a higher potential return, a low-risk mutual fund is a good choice, as they offer higher returns compared to the traditional means of investments.
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Easy liquidation facility
One of the main advantages of mutual funds is that they offer easy liquidity. This means you can cash out your investment at any time without worrying about selling assets or incurring penalties. This makes them a great option for investors who want the flexibility to access their money when needed.
Why should investors choose a low-risk mutual fund?
When it comes to investing, there are a lot of different factors that come into play. Some people are willing to take a riskier investment approach to potentially earn a higher return, while others prefer to minimize risk to protect their original investment. Low-risk mutual funds may be a good option for those in the latter category.
Mutual funds, in general, are already a relatively low-risk investment, as they are diversified and managed by professionals. But within the universe of mutual funds, some are considered lower risk than others. These funds tend to invest in more stable companies with a history of consistent growth and may also have a lower turnover rate.
Of course, no investment is without risk, and even low-risk mutual funds can lose money. But for investors who want to minimise their chances of losing money, these funds may be a good option.
Who should invest in mutual funds?
A mutual fund is an indispensable investment instrument that is commonly used by a large number of investors. The pointers are all about who should invest in the setting and make up your mind to benefit from this investment and mitigate the risk involved:
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People with less risk tolerance
There are some reasons why people with low-risk tolerance should adopt low-risk mutual fund. Low-risk mutual funds tend to be more stable than other types of funds, meaning they are less likely to experience sudden changes in value.
This makes them a good choice for investors looking to preserve their capital. Best-performing mutual funds are also typically less volatile than other types of funds, meaning they are less likely to experience sharp ups and downs in value. This can help smooth out returns over time, making them a good choice for investors looking for stability.
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Short-term investors
There are reasons why short-term investors might choose to invest in low-risk mutual funds. For one, these funds tend to be more stable than their high-risk counterparts, meaning there is less chance of experiencing a sudden drop in value.
Additionally, low-risk mutual funds typically offer lower returns than other types of investments, but they also tend to be less volatile, which can appeal to investors who are looking to preserve their capital.
Finally, low-risk mutual funds can provide a measure of diversification for an investment portfolio, which can help to mitigate overall risk.
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People with less capital for investment
Best low-risk mutual funds tend to be less volatile than their higher-risk counterparts, meaning that the value of the investment is less likely to fluctuate wildly. This can provide peace of mind for investors looking to preserve their capital.
Additionally, low-risk mutual funds tend to offer relatively modest returns, which can be attractive to investors short of capital. Finally, many low-risk mutual funds in India have relatively low minimum investment requirements, making them accessible to a wider range of investors.
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FAQs
Q1. How do identify low-risk mutual funds?
There are several ways to identify low-risk mutual funds. One way is to look at the fund’s historical performance. If the fund has consistently outperformed its peers over a long period, it is likely to be a low-risk fund.
Another way to identify low-risk mutual funds is to look at the fund’s portfolio. If the fund has a diversified portfolio with a mix of different asset classes, it is likely to be a low-risk fund.
Finally, you can also look at the fund’s expense ratio. If the fund has a low expense ratio, it is likely to be a low-risk fund.
Q2. What is a good time to start mutual funds investment?
There is no one-size-fits-all answer to this question, as the best time to start investing in mutual funds will vary depending on your circumstances. However, a few general principles can help guide your decision.
For example, beginning to invest sooner rather than later is generally a good idea if you have a long-term investment goal, such as retirement. This is because the longer your money is invested, the more time it has to grow.
Another factor to consider is your risk tolerance. If you are comfortable with taking on more risk, you may be able to get higher returns by investing in funds with higher growth potential. However, if you are risk-averse, you may want to choose funds with lower risk levels.
Ultimately, the best time to start investing in mutual funds is when you feel comfortable doing so and have a clear investment plan.
Q3. What are the risk indicators of mutual funds?
Several risk indicators can be used to assess the riskiness of a mutual fund. Some of the most commonly used indicators include the beta coefficient, the Sharpe ratio, and the standard deviation.
The beta coefficient measures the volatility of a fund’s returns with regard to the overall market. A high beta indicates that a fund is more volatile than the market, while a low beta suggests that a fund is less volatile than the market.
The Sharpe ratio measures the risk-adjusted return of a fund. A high Sharpe ratio indicates a fund’s higher return relative to its risk.
The standard deviation measures the variability of a fund’s returns. A high standard deviation indicates that a fund is more volatile than a fund with a low standard deviation.
Final words
A mutual fund is an excellent way to start equity investing. However, selecting the right fund is the first big challenge. As a rule of thumb, investors should go for low-risk funds if they are looking for an investment meeting the above-mentioned factors.
Given above are some short term mutual funds, low-risk investment options that can help you move ahead with your financial objectives. Kuvera is one of the leading financial platforms, allowing people to invest in equity, debt, and gold mutual funds from the comfort of their homes.
Kuvera’s mutual fund products are backed by some of the best fund managers in the industry, so you can be sure that your investments are in good hands.
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