Best Low Risk Mutual Fund

Top 10 Low Risk Mutual Fund Schemes

Details of Best Low Risk Mutual Fund Schemes

1. Mirae Asset Arbitrage Fund

   Mirae Asset Arbitrage Fund aims to generate both capital appreciation and steady income by strategically capitalizing on arbitrage opportunities within the equity markets' cash and derivative segments, as well as those existing solely within the derivatives market. A portion of the portfolio is also allocated to debt and money market instruments.

   AUM: ₹3,111.29Cr
   Minimum SIP Amount: ₹5,000
   3 Year Returns: 7.38%

2. Tata Arbitrage Fund

   Tata Arbitrage Fund seeks to deliver reasonable returns to investors by primarily focusing on arbitrage opportunities arising between the cash and derivatives segments of the equity markets. The remaining portion of the fund is invested in debt and money market instruments.

   AUM: ₹12,789.92Cr

   Minimum SIP Amount: ₹5,000

   3 Year Returns: 7.46%

3. Quant Overnight Fund

   Quant Overnight Fund aims to generate returns by investing predominantly in debt and money market instruments that have an overnight maturity period, focusing on short-term opportunities.

   AUM: ₹139.18Cr

   Minimum SIP Amount: ₹5,000

   3 Year Returns: NA

4. Invesco India Arbitrage Fund

   Invesco India Arbitrage Fund's core objective is to generate income by leveraging arbitrage opportunities that arise from pricing discrepancies between the cash and derivatives markets.

   AUM: ₹19,675.15Cr

   Minimum SIP Amount: ₹1,000

   3 Year Returns: 7.68%

5. Bank of India Overnight Fund

   Bank of India Overnight Fund seeks to provide income aligned with low risk and high liquidity by investing in overnight securities, which are characterized by a residual maturity of just one business day.

   AUM: ₹41.29Cr

   Minimum SIP Amount: ₹5,000

   3 Year Returns: 6.42%

6. Kotak Equity Arbitrage Fund

   Kotak Equity Arbitrage Fund aims to generate income by exploiting arbitrage opportunities that emerge from pricing anomalies between the spot and futures markets. Additionally, surplus cash may be strategically deployed in fixed-income instruments.

   AUM: ₹60,373.17Cr

   Minimum SIP Amount: ₹100

   3 Year Returns: 7.57%

7. Edelweiss Arbitrage Fund

   Edelweiss Arbitrage Fund seeks to generate income by primarily investing in arbitrage opportunities found in both the cash and derivative segments of the equity markets, including those solely within the derivative segment. The remaining assets are allocated to debt and money market instruments.

   AUM: ₹14,003.17Cr

   Minimum SIP Amount: ₹100

   3 Year Returns: 7.50%

8. Aditya Birla Sun Life Arbitrage Fund

   Aditya Birla Sun Life Arbitrage Fund aims to generate income through significant investments in equity and equity-related instruments. The fund intends to capitalize on price differentials and mispricing of stocks or indices across various market segments, specifically the cash and futures markets.

   AUM: ₹14,236.09Cr

   Minimum SIP Amount: ₹1,000

   3 Year Returns: 7.39%

9. Nippon India Arbitrage Fund

   Nippon India Arbitrage Fund seeks to generate income by taking advantage of potential arbitrage opportunities existing between the cash and derivative markets, as well as within the derivative segment itself. The fund also invests in debt securities and money market instruments.

   AUM: ₹13,733.37Cr

   Minimum SIP Amount: ₹5,000

   3 Year Returns: 7.36%

10. Axis Overnight Fund

    Axis Overnight Fund seeks to provide reasonable returns consistent with very low interest rate risk and a high degree of liquidity. This is achieved through primary investments in overnight securities that have a maturity or residual maturity of one business day.

    AUM: ₹6,348.03Cr

    Minimum SIP Amount: ₹500

    3 Year Returns: 6.38%

Taxability of Low Risk Mutual Funds

1. Long-term Capital Gains Tax (LTCG):

   If you hold your investment in low risk mutual funds for more than 3 years, the gains are classified as long-term capital gains and taxed at a flat rate of 20% after applying indexation benefits. Indexation adjusts the purchase price for inflation, reducing the taxable gains and thus the tax burden.

2. Short-term Capital Gains Tax (STCG):

   If you sell your units before completing 3 years, the gains are considered short-term capital gains. These gains are added to your total income and taxed according to your applicable income tax slab rate, which could be higher than LTCG tax rates.

3. Tax Deducted at Source (TDS):

   Unlike some other investment avenues, TDS is not deducted at source on gains from low risk mutual funds, making the process simpler for investors.

Features of Low Risk Mutual Fund

Below are the reasons why you should consider the best low risk mutual funds for investing:

1. Capital Preservation:

   The foremost feature is the protection of the principal amount. These funds primarily invest in high-quality debt instruments such as government securities, treasury bills, and AAA-rated corporate bonds to minimize the risk of loss.

2. Predictable and Stable Returns:

   Unlike equity funds, low risk mutual funds offer more predictable returns by focusing on fixed-income securities, thus reducing exposure to market volatility.

3. Low Volatility:

   The portfolio composition of these funds ensures minimal fluctuations in net asset value (NAV), providing a smoother investment experience even during turbulent market conditions.

4. High Liquidity:

   Many low risk mutual funds, such as liquid funds and money market funds, offer quick redemption options, making them suitable as a low risk investment option for parking funds temporarily or building an emergency corpus.

5. Short to Medium Investment Horizon:

   These funds cater to investors with investment tenures ranging from a few days (overnight funds) to a few years (short-term debt funds), allowing flexibility based on individual financial goals.

6. Diversification:

   By investing across various debt instruments and issuers, these funds reduce concentration risk and enhance portfolio stability.

7. Tax Efficiency:

   Some low risk mutual funds also serve as tax saving mutual funds, offering benefits under sections like 80C, thus acting as a tax saving investment option while maintaining low risk.

8. Potential for Low Risk High Return Mutual Fund:

   While traditionally associated with moderate returns, certain low risk funds like dynamic bond funds or short-term debt funds can offer relatively higher returns without significantly increasing risk, fitting the profile of a low risk high return mutual fund.

Why Choose the Best Low Risk Mutual Funds?

• They provide the best investment plan for conservative investors who prioritize safety over aggressive growth.

• Suitable for retirees, first-time investors, or anyone seeking to balance risk and return.

• They offer an alternative to traditional fixed deposits with potentially better post-tax returns and greater liquidity.

Benefits of Best Low Risk Mutual Fund Scheme

Low risk mutual funds are designed to offer investors a secure and stable investment avenue with minimal exposure to market volatility. Here are the key benefits of investing in the best low risk mutual funds:

1. Capital Preservation:

   These funds prioritize safeguarding the principal amount, making them ideal for conservative investors who want to avoid significant losses.

2. Predictable and Stable Returns:

   By investing primarily in high-quality debt instruments such as government bonds and AAA-rated corporate papers, low risk mutual funds provide steady and relatively predictable returns, often outperforming traditional fixed deposits.

3. Low Volatility:

   Due to their focus on debt and money market securities, these funds experience minimal price fluctuations, reducing the risk compared to equity or high-risk mutual funds.

4. High Liquidity:

   Most low risk mutual funds allow easy redemption, making them a convenient low risk investment option for short-term financial goals or emergencies.

5. Tax Efficiency:

   Many tax saving mutual funds qualify as a tax saving investment under long-term capital gains with indexation, which can be more advantageous than fixed deposits. They also do not attract TDS, enhancing post-tax returns.

6. Better Returns than Fixed Deposits:

   While fixed deposits are a preferred choice for risk-averse investors, the best low risk mutual funds often provide higher returns with similar safety, making them an attractive best investment plan for conservative portfolios.

7. Regular Income Source:

   Some low risk mutual funds can generate a steady income stream, serving as a supplementary source of income while preserving capital.

Who Should Invest in a Low Risk Mutual Fund?

Low risk mutual funds are suitable for a variety of investors, particularly those who prioritize safety and capital preservation:

1. Conservative Investors:

   Individuals who prefer to avoid market volatility and want a stable investment avenue with minimal risk for better retirement planning.

2. New and First-Time Investors:

   Those who lack extensive market knowledge and want to start investing with a low risk high return mutual fund to build confidence.

3. Short-Term Savers:

   Investors with financial goals within 1 to 3 years can use these funds to achieve their objectives without risking principal.

4. Retirees:

   Ideal for retirees seeking to preserve their savings while generating regular income without exposure to high market risks.

5. Tax Savers:

   Individuals in higher tax brackets looking for tax saving investment options that offer both capital safety and tax benefits.

6. Emergency Fund Builders:

   Investors who want to maintain liquidity and quick access to funds while earning better returns than a savings account.

To Sum Up!

Selecting the best low-risk mutual fund involves careful consideration of various factors such as historical performance, expense ratios, and the fund manager's track record. Investors should assess their financial goals and risk tolerance before making a decision, ensuring alignment with the chosen mutual fund's objectives.