5 Best Low-Risk Mutual Funds to Invest in 2023

5 Best Low-Risk Mutual Funds To Invest In 2023

Explore financial stability with the 5 Best Low-Risk Mutual Funds. In this article, we delve into secure investment options offering consistent returns. Discover how these funds can be a cornerstone for a risk-averse yet growth-oriented portfolio.

Mutual fund investments have gained immense popularity among investors in India due to their potential for diversification, consistent returns, and professional management. One of the unique characteristics of mutual fund schemes is that they provide investment opportunities for practically all types of investors.

As per the report by CAMS (Computer Age Management Services), 54% of the first-time mutual fund investors in the last 5 years were millennials, adding up to roughly 85 lakhs. However, some investors seek high returns and, thus, have high-risk tolerance capabilities. Others, on the other hand, value capital preservation and favor low-risk investing options. For such investors, low-risk mutual fund investments offer a balance between potential returns and safety.

However, before investing, you need to understand everything about low-risk mutual funds and which ones are the best in 2023.

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What are Low-Risk Mutual Fund Schemes?

Low-risk mutual funds are investment schemes that primarily focus on preserving capital and minimizing volatility. These funds invest in relatively safer assets with lower volatility and risk. It can include government securities, high-quality corporate bonds, or even debt instruments with low credit risk.

While the returns from low-risk mutual funds may be more conservative compared to equity funds, they provide investors with greater stability and a lower chance of capital erosion.

Features of Low-Risk Mutual Funds

Here are some of the features of low-risk mutual fund investments that make it a preferred choice for risk-averse investors:

  • Asset Allocation: Low-risk mutual fund schemes typically have a significant allocation to fixed-income securities such as bonds and money market instruments. The balance between equity and debt varies based on the fund’s objective and risk appetite and aims to reduce volatility while generating consistent returns.
  • Stability: These funds aim to provide stability and steady returns over time. This makes them suitable for investors with a low tolerance for market fluctuations.
  • Capital Preservation: For risk-averse investors, the preservation of their capital is paramount. The primary objective of low-risk mutual funds is to preserve your capital, even during uncertain market conditions.
  • Lower Volatility: Due to their conservative approach, these mutual fund investments tend to exhibit lower volatility compared to equity-oriented funds. This allows investors to exit even in shorter durations.
  • Diversification: This is one of the significant traits of mutual funds. The fund managers of these funds focus on diversifying the portfolio across various issuers and sectors to minimize concentrated risk.

Best Low-Risk Mutual Funds to Invest in 2023

Looking for the best mutual funds to invest in 2023 with low risk? Here are the 5 best mutual funds with low risk and consistent returns as per Moneycontrol:

1) Kotak Equity Hybrid Fund

Kotak Equity Hybrid Fund is a hybrid fund that invests in a mix of equities, debt, and other asset classes to provide diversification and potentially higher returns while minimizing volatility. The fund follows an aggressive hybrid allocation strategy.

The fund has been in existence for more than 8+ years and has an expense ratio of 0.47%. The total assets under management (AUM) of this hybrid fund are Rs. 4049.59 crores.

2) ICICI Prudential Equity and Debt Fund

The ICICI Prudential Equity and Debt Fund is a hybrid fund with an aggressive investment strategy to generate long-term capital appreciation.

The fund has been in existence for 10+ years and has an expense ratio of 1.13%. The total assets under management are Rs. 24,990 crore and the minimum investment required to invest in this fund is Rs. 100.

3) HSBC Conservative Hybrid Fund

The HSBC Conservative Hybrid Fund is a hybrid fund with a conservative strategy. Its investment objective is to generate capital appreciation and income by making investments across equities, debt, and government securities in a predetermined ratio.

The fund has been in existence for more than 10 years and has an expense ratio of 1.33%. The total assets under management are Rs. 113.8 crores.

4) Edelweiss Aggressive Hybrid Fund

Edelweiss Aggressive Hybrid (Direct-Growth) Fund is a hybrid fund with an aggressive investment strategy. It primarily invests 65–80% of its assets in equities and related instruments, with the remainder in fixed-income securities.

The fund has been in existence for more than 10 years and has an expense ratio of 0.57%. The total assets under management are Rs. 744 crore and the minimum investment required to invest in Edelweiss Aggressive Hybrid Fund is Rs. 500.

5) TATA Arbitrage Fund

TATA Arbitrage Fund is an arbitrage fund with a conservative investment strategy, predominantly in equity, debt, government securities, and low-risk securities. It is suitable for people looking for a regular income.

The fund has been in existence for more than 4+ years and has an expense ratio of 0.29%. The total assets under management are Rs. 6955.06 crores.

In a Nutshell

Low-risk mutual fund schemes play a vital role in a well-diversified investment portfolio. They provide stability in returns and capital preservation for risk-averse investors. While the returns from these funds may be conservative, they offer a sense of security during uncertain economic conditions. It is essential to align your choice of low-risk mutual funds with your financial goals and risk appetite before investing.

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Frequently Asked Questions

Q: Can low-risk mutual funds offer higher returns compared to bank fixed deposits?

The returns of the low-risk mutual fund schemes depend on the type of fund you select to invest in. While low-risk mutual funds have the potential to offer slightly higher returns than bank fixed deposits, they also carry some level of market risk.

Q: How often should I review my low-risk mutual fund investments?

It is advisable to review your low-risk mutual fund investments periodically, at least once every six months. Regular reviews help you assess the fund’s performance and make any necessary adjustments to your investment strategy. You can invest more, hold, or sell your mutual funds based on their performance or a change in your investment preference.

Q: Are low-risk mutual funds suitable for long-term goals?

Low-risk mutual funds are generally more suitable for short to medium-term financial goals due to their conservative approach. For long-term goals, investors may consider a balanced approach by including a mix of equity and debt funds to achieve potentially higher returns.

Q: Can low-risk mutual funds provide protection against inflation?

While low-risk mutual fund schemes aim to preserve capital, their returns may not necessarily always outpace inflation. For protection against inflation, investors may need to consider a diversified portfolio that includes investments with the potential for higher returns over the long term.