As the name suggests, low-risk mutual funds are those investment options that carry minimal risk and a stable return assurance. Investments are primarily restricted to real estate, government bonds, etc. These funds are always a step ahead of inflation. To do so, they invest a major chunk of their total assets in debt instruments. Choosing the best low risk mutual funds can help stabilise the risk-reward ratio in an investor’s portfolio.
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Fund Name | Category | Risk | 1Y Returns | Rating | Fund Size(in Cr) |
---|---|---|---|---|---|
Invesco India Arbitrage Fund | Hybrid | Low | 8.5% | 5 | ₹17,656 |
Tata Arbitrage Fund | Hybrid | Low | 8.5% | 5 | ₹11,671 |
Bank of India Overnight Fund | Debt | Low | 6.8% | 5 | ₹60 |
Axis Overnight Fund | Debt | Low | 6.8% | 5 | ₹8,135 |
Mirae Asset Overnight Fund | Debt | Low | 6.8% | 5 | ₹636 |
Bank of India Overnight Fund | Debt | Low | 6.9% | 5 | ₹51 |
Quant Overnight Fund | Debt | Low | 7.0% | 5 | ₹203 |
Kotak Equity Arbitrage Fund | Hybrid | Low | 8.7% | 4 | ₹53,682 |
Edelweiss Arbitrage Fund | Hybrid | Low | 8.6% | 4 | ₹12,232 |
Axis Arbitrage Fund | Hybrid | Low | 8.4% | 4 | ₹5,528 |
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Here are some features of the best low risk mutual funds –
Asset allocation: For low-risk mutual funds, a significant amount of assets are allocated to debt instruments.
Risk-reward ratio: The top low-risk mutual funds minimise or even eliminate the risk of investors. Fund managers place such assets in low volatile segments, where the likelihood of earning a hefty return is also low.
Long-term Capital Gains Tax: If you hold your stake in the best low risk mutual funds for more than 3 years, returns are taxed at a flat rate of 20% with indexation benefits.
Short-term Capital Gains Tax: On the other hand, if one decides to sell the assets before the 3-year mark, returns would be added to his/her yearly income and taxed as per the applicable slab rate.
TDS: Tax deducted at source or TDS doesn’t apply to low risk mutual funds.
The best low risk mutual funds are suitable for new investors who lack the required knowledge to navigate the various other fund options safely. Predominantly, such investors have a limited risk appetite. Such a debt instrument is perfect if an individual is looking for the same level of security as an FD but also desires higher returns. These funds may also be ideal for those who want to preserve high liquidity in their investment portfolio.
Study some of the important considerations that an investor needs to undertake before low risk mutual fund investment –
Time horizon: Individuals with an investment horizon of less than a year can consider investing in these options. Such low risk funds can help one achieve his/her short-term financial objectives.
Investment goal: Investing in the best low risk mutual funds requires an extensive evaluation of one’s financial goals. It helps one determine the quantum of investment they need to make and the time period for which they want to hold their stakes.
Risk appetite: Even though these funds offer high liquidity, they remain unaffected by interest rate risk and credit risk, unlike liquid mutual funds. Nevertheless, inflation risk can reduce projected returns, which is why investors must be wary of the same. To scale investments, it’s necessary to determine the level of losses or reduction in gains one can digest shall a scheme underperform.
Past performance: Checking how such a low-risk fund has performed in the past three years against a benchmark index is crucial for guaranteed returns. Also, investors must figure out the expense ratio or the management cost of such funds before investing.
Credit rating check: Practised investors must go through the low-risk fund fact sheet carefully to know more about the duration and the credit rating of bonds in this portfolio.
The best low-risk mutual funds in 2024 offer the following benefits –
Fulfilment of short-term goals: As stated previously, these low-risk funds can be an ideal vehicle to achieve short-term financial objectives. Any goal that an individual wants to achieve within the next year can be fulfilled with these investment options.
Minimal risk: One of the biggest advantages of these funds is that they face minimal risk. Credit risk is eliminated for these options. Additionally, interest rate fluctuations do not hamper returns from these instruments. In most cases, low-risk funds also manage to offset the effects of inflation. However, a minimal risk from this factor remains.
Source of regular income: Besides securing the capital, the best low-risk mutual funds can act as a supplementary source of income as well.
Tax savings for certain income slabs: Individuals falling under the higher slab rates can save a significant amount in taxes by investing in these funds instead of FD. Such tax savings is more apparent in terms of long-term capital gains, which offer indexation benefits.
Higher returns when compared to fixed deposits: Bank fixed deposits are a preferred form of investment for individuals with minimal risk appetite. However, returns from fixed deposits tend to be restricted severely as well. Low risk mutual funds can offer the same level of security for the underlying capital while also offering increased returns.
Enhanced liquidity: Investors opting for low liquidity funds often face a severe cash crunch during financial emergencies. These low-risk funds ensure that liquidity is never a problem. Investors can quickly access their share to curtail emergencies.
Considering all of these aspects is crucial before investing in such a fund. Doing so will maximise ROI and help achieve investment goals.
Now let us jump and check about these top 10 mutual fund schemes.
Fund Performance: The Invesco India Arbitrage Fund has given 7.38% annualized returns in the past three years and 6.22% in the last 5 years. The Invesco India Arbitrage Fund comes under the Hybrid category of Invesco Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Invesco India Arbitrage Fund via lump sum is ₹1,000 and via SIP is ₹500.
Min Investment Amt | ₹1,000 |
---|---|
AUM | ₹17,656Cr |
1Y Returns | 8.5% |
Fund Performance: The Tata Arbitrage Fund has given 7.01% annualized returns in the past three years and 6.25% in the last 5 years. The Tata Arbitrage Fund comes under the Hybrid category of Tata Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Tata Arbitrage Fund via lump sum is ₹5,000 and via SIP is ₹150.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹11,671Cr |
1Y Returns | 8.5% |
Fund Performance: The Bank of India Overnight Fund comes under the Debt category of Bank of India Mutual Funds.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹60Cr |
1Y Returns | 6.8% |
Fund Performance: The Axis Overnight Fund has given 6.01% annualized returns in the past three years and 4.93% in the last 5 years. The Axis Overnight Fund comes under the Debt category of Axis Mutual Funds.
Min Investment Amt | ₹500 |
---|---|
AUM | ₹8,135Cr |
1Y Returns | 6.8% |
Fund Performance: The Mirae Asset Overnight Fund has given 6.01% annualized returns in the past three years and 4.97% in the last 5 years. The Mirae Asset Overnight Fund comes under the Debt category of Mirae Asset Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Mirae Asset Overnight Fund via lump sum is ₹5,000 and via SIP is ₹99.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹636Cr |
1Y Returns | 6.8% |
Fund Performance: The Bank of India Overnight Fund comes under the Debt category of BOI AXA Mutual Funds.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹51Cr |
1Y Returns | 6.9% |
Fund Performance: The Quant Overnight Fund comes under the Debt category of Quant Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Quant Overnight Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹203Cr |
1Y Returns | 7.0% |
Fund Performance: The Kotak Equity Arbitrage Fund has given 7.17% annualized returns in the past three years and 6.16% in the last 5 years. The Kotak Equity Arbitrage Fund comes under the Hybrid category of Kotak Mahindra Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Kotak Equity Arbitrage Fund via lump sum is ₹100 and via SIP is ₹100.
Min Investment Amt | ₹100 |
---|---|
AUM | ₹53,682Cr |
1Y Returns | 8.7% |
Fund Performance: The Edelweiss Arbitrage Fund has given 7.1% annualized returns in the past three years and 6.2% in the last 5 years. The Edelweiss Arbitrage Fund comes under the Hybrid category of Edelweiss Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Edelweiss Arbitrage Fund via lump sum is ₹100 and via SIP is ₹100.
Min Investment Amt | ₹100 |
---|---|
AUM | ₹12,232Cr |
1Y Returns | 8.6% |
Fund Performance: The Axis Arbitrage Fund has given 6.96% annualized returns in the past three years and 6.01% in the last 5 years. The Axis Arbitrage Fund comes under the Hybrid category of Axis Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Axis Arbitrage Fund via lump sum is ₹500 and via SIP is ₹100.
Min Investment Amt | ₹500 |
---|---|
AUM | ₹5,528Cr |
1Y Returns | 8.4% |
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