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Best Moderate Risk Mutual Funds

Different categories of mutual funds have varying risk levels that may range from very high, high, moderately high, moderate, and moderately low to low. As the name suggests, moderate risk funds expose investors’ capital to only average levels of risk. The best moderate risk funds invest in varied securities to maintain reasonable market risks against inflation-adjusted returns.

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Top 10 Moderate Risk Mutual Funds

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Canara Robeco Conservative Hybrid FundHybridModerate11.1%5₹1,045
Axis Gilt FundDebtModerate3.1%5₹147
Kotak Dynamic Bond FundDebtModerate4.0%5₹3,134
Nippon India Banking & PSU Debt FundDebtModerate4.6%5₹6,156
ICICI Prudential Short Term FundDebtModerate4.6%5₹22,059
Aditya Birla Sun Life Corporate Bond FundDebtModerate4.5%5₹19,392
Nippon India Short Term FundDebtModerate5.6%5₹9,692
Aditya Birla Sun Life Short Term Direct FundDebtModerate4.8%5₹9,449
ICICI Prudential Corporate Bond FundDebtModerate4.3%5₹19,104
IIFL Dynamic Bond FundDebtModerate6.5%5₹722
View All

Features of Moderate Risk Mutual Fund

The salient features of the best moderate risk funds are discussed below - 

Types: These funds mainly refer to MIP funds, hybrid funds, dynamic bond funds, short-duration funds, and arbitrage funds.

Asset allocation: In dynamic bond funds, assets are allocated to long-term and short-term bonds based on the interest rate levels. On the other hand, dynamic asset allocation mutual funds park money in fixed income investments and stocks. Asset allocation is often changed based on prevailing market momentum. 

Risk-reward ratio: Moderate risk mutual funds invest in equity and debt instruments. This offers investors steady risk-adjusted returns. Alternatively, in case the funds generate negative returns, the resulting losses will be moderate to low. 

Taxability

Investors must note that short duration and dynamic bond mutual funds are treated as debt funds and taxed accordingly. However, dynamic asset allocation mutual funds are given the same treatment as equity funds if the fund’s equity assets are at least 65% on a median basis. Note that when the fund’s equity assets are less than 65%, it is given a similar treatment as debt funds and taxed accordingly. 

Long-term Capital Gains Tax: Capital gains on short-duration funds and dynamic bond fund held for more than 3 years are subject to long-term capital gains tax at the rate of 20% with indexation. Conversely, proceeds on a fund with a higher concentration of equity instruments will attract 10% LTCG if held for more than 1 year. Note that LTCG on equity-based funds is exempt from tax up to Rs.1 lakh. 

Short-term Capital Gains Tax: Capital gains on dynamic bond funds and short duration funds held for less than three 3 years attracts short-term capital tax as per the investor’s tax slab. On the other hand, gains on equity-oriented schemes held for less than a year fetch a 15% tax irrespective of the amount. 

TDS: Fund managers are mandated to deduct a 10% TDS on the dividend pay-outs exceeding Rs.5000. 

Who Are These Funds Suited For?

Investors who plan to generate substantial returns without being exposed to intense risks often park their money into the best moderate risk mutual funds. These schemes are considered suitable for investors whose primary objective is to generate stable returns and diversify their investment portfolio. 

Risk-conscious investors must note that these funds involve some risks premised on their asset allocation. For instance, an equity-based fund is more vulnerable to market volatility. Conversely, a debt-oriented scheme can be susceptible to moderate levels of credit, inflation, and interest risks. 

It must be noted that these funds provide adequate returns over a medium to long-term time horizon.  

Nonetheless, investors must consider these few things before parking money in any top moderate risk mutual funds

Investment goal: Investors may find it more convenient to identify their investment objective before buying units of a scheme. Typically, moderate risk mutual funds are considered more suited for mid-term financial goals. 

Risk profile: Recognising personal risk-taking capability makes the process of investing simpler in more than occasion. Measuring their risk-bearing capacity is essentially estimating the level of loss they can digest on their investments. In most cases, moderate risk mutual funds expose investors to credit and interest risks.

Past performance record: A fund’s performance record is a crucial point of research. Seasoned investors make it a point to find out things like AMC track record, investment style of the fund manager, and performance when compared to a benchmark to determine suitability.

Expense ratio: Generally, the expense ratio varies from one fund scheme to another. Essentially, it is the annual maintenance charge levied by an AMC. 

Time horizon: Best moderate risk mutual fund is considered suitable for a medium investment horizon of 3 - 5 years. 

Fact sheet: Investors often prefer checking credit ratings and the duration of underlying bonds in their choice of fund to make an informed decision.  

Direct and regular plan: Investors can invest in a moderate risk fund via a direct plan or a regular plan. In the case of the former, there are no intermediaries, and the fund houses offer the fund. Conversely, in the case of regular plans, investors can park money into the best moderate risk funds via a third-party agent, i.e., a broker or a distributor. A direct plan attracts a lower expense ratio when compared to a regular plan.

Major Advantages

These are some of the major benefits of the best moderate risk funds 2021

Returns: These funds primarily invest in moderate risk instruments that generate stable returns. Since the portfolio comprises a mix of debt and equity instruments, investors can generate sustainable risk-adjusted earnings over a long time. 

Tax-efficient returns: When compared to fixed deposits, moderate risks funds are considered more tax-efficient. 

Financial goals: These funds come are mostly suited for an investment horizon of 3-5 years. Accordingly, investors with mid-term financial goals like saving up for a down payment, paying off unsecured debt, etc., invest in moderate-risk funds to achieve such goals. 

Safety quotient: The best moderate risk funds are considered safer than high-risk investments. The scope of diversification allows cushioning the impact of losses, thereby exposing investors to moderate losses. 

Investment mode: Investors have the flexibility to invest in moderate-risk funds via SIP or a lump sum as per their requirements and financial standing. Note the minimum investment amount depends on the fund scheme. 

Let's have a closer look

Now let us jump and check about these top 10 mutual fund schemes.

Canara Robeco Conservative Hybrid Fund Direct Growth

Fund Performance: The Canara Robeco Conservative Hybrid Fund has given 12.62% annualized returns in the past three years and 10.15% in the last 5 years. The Canara Robeco Conservative Hybrid Fund belongs to the Hybrid category of Canara Robeco Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Canara Robeco Conservative Hybrid Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹1,045Cr
1Y Returns11.1%

Axis Gilt Fund Direct Plan Growth

Fund Performance: The Axis Gilt Fund has given 9.69% annualized returns in the past three years and 7.1% in the last 5 years. The Axis Gilt Fund belongs to the Debt category of Axis Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Axis Gilt Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹147Cr
1Y Returns3.1%

Kotak Dynamic Bond Fund Direct Growth

Fund Performance: The Kotak Dynamic Bond Fund has given 9.25% annualized returns in the past three years and 8.21% in the last 5 years. The Kotak Dynamic Bond Fund belongs to the Debt category of Kotak Mahindra Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Kotak Dynamic Bond Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹3,134Cr
1Y Returns4.0%

Nippon India Banking & PSU Debt Fund Direct Growth

Fund Performance: The Nippon India Banking & PSU Debt Fund has given 8.77% annualized returns in the past three years and 7.75% in the last 5 years. The Nippon India Banking & PSU Debt Fund belongs to the Debt category of Nippon India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Nippon India Banking & PSU Debt Fund via lump sum is ₹5,000 and via SIP is ₹100.

Min Investment Amt₹5,000
AUM₹6,156Cr
1Y Returns4.6%

ICICI Prudential Short Term Fund Direct Plan Growth

Fund Performance: The ICICI Prudential Short Term Fund has given 8.67% annualized returns in the past three years and 7.84% in the last 5 years. The ICICI Prudential Short Term Fund belongs to the Debt category of ICICI Prudential Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Short Term Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹22,059Cr
1Y Returns4.6%

Aditya Birla Sun Life Corporate Bond Fund Direct Growth

Fund Performance: The Aditya Birla Sun Life Corporate Bond Fund has given 8.49% annualized returns in the past three years and 7.77% in the last 5 years. The Aditya Birla Sun Life Corporate Bond Fund belongs to the Debt category of Aditya Birla Sun Life Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Aditya Birla Sun Life Corporate Bond Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹19,392Cr
1Y Returns4.5%

Nippon India Short Term Fund Direct Growth

Fund Performance: The Nippon India Short Term Fund has given 8.46% annualized returns in the past three years and 7.5% in the last 5 years. The Nippon India Short Term Fund belongs to the Debt category of Nippon India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Nippon India Short Term Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹9,692Cr
1Y Returns5.6%

Aditya Birla Sun Life Short Term Direct Fund Growth

Fund Performance: The Aditya Birla Sun Life Short Term Direct Fund has given 8.46% annualized returns in the past three years and 7.66% in the last 5 years. The Aditya Birla Sun Life Short Term Direct Fund belongs to the Debt category of Aditya Birla Sun Life Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Aditya Birla Sun Life Short Term Direct Fund via lump sum is ₹1,000 and via SIP is ₹1,000.

Min Investment Amt₹1,000
AUM₹9,449Cr
1Y Returns4.8%

ICICI Prudential Corporate Bond Fund Direct Plan Growth

Fund Performance: The ICICI Prudential Corporate Bond Fund has given 8.23% annualized returns in the past three years and 7.53% in the last 5 years. The ICICI Prudential Corporate Bond Fund belongs to the Debt category of ICICI Prudential Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Corporate Bond Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹19,104Cr
1Y Returns4.3%

IIFL Dynamic Bond Fund Direct Growth

Fund Performance: The IIFL Dynamic Bond Fund has given 7.69% annualized returns in the past three years and 7.34% in the last 5 years. The IIFL Dynamic Bond Fund belongs to the Debt category of IIFL Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in IIFL Dynamic Bond Fund via lump sum is ₹10,000 and via SIP is ₹1,000.

Min Investment Amt₹10,000
AUM₹722Cr
1Y Returns6.5%

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