Best Low-Risk Mutual Funds
If you are expecting the assurance of stable and reasonable returns, low-risk mutual funds are the option to go for. These mutual funds primarily invest in real estate and government bonds that aim to stay a step ahead of inflation all the time. Perfect to maintain the value of money from decreasing, low-risk mutual funds are highly preferred by semi-conservative investors looking to reap the benefits of a mutual fund.
For your portfolio to look good, make sure to invest in a low-risk mutual fund that invests in a combination of well-performing debt instruments. Stable but guaranteed returns will help you stay at peace with respect to your investments if you choose to invest in one of the below-mentioned top-performing low-risk mutual funds in 2022.
Top 10 Low-Risk Mutual Funds To Invest In 2022
| Fund Name | Category | 1 Year Returns (%) | Fund Size (crores) |
| Tata Arbitrage Fund | Hybrid | 5 | INR 11,192 |
| Edelweiss Arbitrage Fund | Hybrid | 5.1 | INR 6,550 |
| Nippon India Arbitrage Fund | Hybrid | 5 | INR 11,757 |
| HSBC Overnight Fund | Debt | 3.3 | INR 746 |
| TRUST MF Overnight Fund | Debt | NA | INR 202 |
| Mirae Asset Overnight Fund | Debt | 3.3 | INR 383 |
| BOI AXA Overnight Fund | Debt | 3.4 | INR 84 |
| BNP Paribas Arbitrage Fund | Hybrid | 4.8 | INR 697 |
| L&T Arbitrage Opportunities Fund | Hybrid | 4.8 | INR 4,471 |
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Who Should Invest In Low-Risk Mutual Funds
The aforementioned list of low-risk mutual funds would be best suited for those who are just starting out in their investment journey. People with a low-risk appetite can invest in low-risk mutual funds as it also provides a certain amount of security. These funds provide high liquidity and stabilise a portfolio really well. With that being said, investors investing in high-risk funds can also invest in low-risk mutual funds to balance their portfolios.
Factors To Consider Before Investing In Low-Risk Mutual Funds
Investment Goals
The first step to investing is to analyse and determine your investment goals. This includes the amount you’re willing to invest on a regular basis, how long you’re going to hold on to your investments, the amount of risk you’re willing to take, and the returns you’re expecting, among others. Setting proper investment goals helps in wiser investing and improves your portfolio. Remember to not compare your goals with other investors, as each and every individual has varied financial objectives.
Time Period
Low-risk funds provide the best comparative returns when invested for a time horizon of about a few months. These funds are perfect to beat inflation and satisfy your short-term money requirements. If your money is losing value by staying stagnant in a bank account, it’s perfect to invest it in a low-risk mutual fund and earn some reasonable returns.
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Risk Factor
Low-risk mutual funds like the name suggests, are less risky in nature when compared to equity funds because they invest heavily in debt instruments. Perfect for investors who are hesitant to essentially bet their money on a high-risk fund, low-risk funds are ideal for risk-averse people and investors looking to balance their portfolios.
If people choose to invest long-term in low-risk funds, they will eventually end up with losses, as there are countless better fund schemes in the market. Low-risk funds generate optimal returns when invested for a short period of a few months.
History Of Fund Performance
Analysing the past trends of a low-risk mutual fund before investing in it is essential and can give you meaningful insights as to how the said fund is performing. A fund that was able to meet the goals set in the past is more likely to perform well in the future. When it comes to low-risk funds in particular, since the returns are generally lower than other schemes in the market, determining the selected fund’s historical returns and comparing it with other similar mutual funds in the market will also help in giving better clarity to you.
Taxability
Long Term Capital Gains (LTCG) – If an investor holds on to their investments for a time horizon of more than 3 years, the returns are taxed at a flat rate of 20% with indexation benefits (indexation is the adjustment of the purchase price according to the inflation rate).
Short Term Capital Gains (STCG) – If an investor decides to sell their investments before the 3-year time period, the returns are added to their monthly income and are taxed based on the tax bracket the investor falls under.
Tax Deducted at Source (TDS) – Low-risk mutual funds are exempt from TDS.
This clearly tells us that investing in a low-risk mutual fund and holding it for more than a year or two is going to generate negative returns in the long run. So if you’re looking for better options to invest long-term, analyze different mutual fund schemes available in the market.
Advantages Of Low-Risk Mutual Funds
Low-Risk Factor
Low-risk mutual funds are known for their low-risk nature and are perfect for conservative investors and people with a high-risk appetite looking to balance their portfolios. With added benefits of no credit risk, impact from interest rate fluctuations, and inflation impact, low-risk funds are ideal to fulfill short-term monetary goals.
Short-Term Goals
Achieving short-term financial goals and requirements is possible with low-risk mutual funds. Beating inflation and getting more returns than from idle savings returns are added benefits. Investing short-term and selling the investments within a year increases liquidity and will solve emergency money-crunch situations as well.
Final Word
With that comprehensive article on low-risk mutual funds that covered the top 10 low-risk funds, factors to keep in mind, investor targets, advantages, and taxability, you now know everything there is to know to invest in them. Be sure to keep in mind that mutual funds are subject to market risks and read all the scheme-related documents carefully.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
