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Best Mutual Funds with Lowest Risk

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List of Low Risk Mutual Funds in 2024

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Fund name
AUM
1Y CAGR
3Y CAGR
Till Date CAGR
reliance-nippon-life-logo
Nippon India Arbitrage Fund (G)

13895.862 Cr

7.7%

5.5%

6.9%

hdfc-logo
HDFC Overnight fund (G)

6753.587 Cr

6.7%

5.1%

5.9%

sbi-logo
SBI Overnight Fund (G)

14332.166 Cr

6.7%

5.1%

6.5%

uti-logo
UTI Arbitrage Fund (G)

4548.627 Cr

7.8%

5.5%

6.8%

hsbc-global-logo
HSBC Arbitrage Fund (G)

2003.184 Cr

7.6%

5.3%

5.9%

kotak-mahindra-logo
Kotak Overnight fund (G)

4369.927 Cr

6.7%

5.1%

4.7%

aditya-birla-sun-life-logo
Aditya Birla Sun Life Overnight fund (G)

5357.21 Cr

6.7%

5.1%

4.8%

sundaram-logo
Sundaram Overnight Fund (G)

897.957 Cr

6.7%

5.1%

4.8%

kotak-mahindra-logo
Kotak Equity Arbitrage Fund (G)

40050.887 Cr

8%

5.8%

6.9%

edelweiss-logo
Edelweiss Arbitrage Fund (G)

9167.209 Cr

7.8%

5.6%

6.1%

icici-prudential-logo
ICICI Prudential Overnight Fund (G)

7030.248 Cr

6.8%

5.1%

4.8%

reliance-nippon-life-logo
Nippon India Overnight Fund (G)

4903.1 Cr

6.7%

5.1%

4.8%

tata-logo
Tata Overnight Fund (G)

1705.681 Cr

6.7%

5.1%

4.7%

axis-logo
Axis Overnight Fund (G)

4913.057 Cr

6.8%

5.2%

4.7%

dsp-logo
DSP Overnight Fund (G)

1230.136 Cr

6.8%

5.1%

4.8%

uti-logo
UTI Overnight Fund (G)

2978.147 Cr

6.8%

5.2%

6%

aditya-birla-sun-life-logo
Aditya Birla Sun Life Arbitrage Fund (G)

10549.233 Cr

7.7%

5.5%

6.3%

union-logo
Union Overnight Fund (G)

156.891 Cr

6.7%

5.1%

4.6%

icici-prudential-logo
ICICI Prudential Equity Arbitrage Fund (G)

17728.733 Cr

7.7%

5.5%

6.9%

axis-logo
Axis Arbitrage fund (G)

3931.163 Cr

7.5%

5.5%

5.8%

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All Mutual fund investments are subject to risk. Each fund, however, will have a different level of risk associated with them – Low risk, moderate risk, high risk etc.
This is communicated through product Labeling for every mutual fund through its risk-o-meter. It depicts the risk level of a scheme. Low risk funds are investment options with minimal risk when compared to high risk equity schemes. 
Low risk funds are majorly debt funds that invest across government schemes, money market instruments, etc. This article covers low risk mutual funds, their features and who should invest in them.

Top 5 Mutual Funds with Lowest Risk in 2024

Fund NameReturn Since InceptionExpense Ratio
Nippon India Arbitrage Fund6.8%1.05%
HDFC Overnight fund5.8%0.2%
SBI Overnight Fund6.5%0.18%
Kotak Equity Arbitrage Fund6.8%1.01%
Axis Arbitrage Fund Growth5.5%1.05%

What are Low Risk Mutual Funds?

Low risk mutual funds offer more or less stable returns. However, this doesn’t mean that the schemes are risk-free. Low risk funds offer higher returns and are comparatively more tax-efficient than traditional investments like fixed deposits. Therefore, the schemes are suitable for risk-averse investors.
Debt funds are low risk mutual funds that invest in money market instruments, government bonds, etc. As a result, the risk associated with these instruments is lower. There are multiple schemes under the debt funds category. Some of which are liquid funds, dynamic bond funds, gilt funds, ultra-short-term funds, etc.
Debt funds normally come with some amount of interest rate risk and credit risk. However, investing in higher rated bonds will help in addressing the associated risk.
Since these funds carry minimum risk and aim to offer optimal returns, they are a good option to park idle money for short durations.

Features of Low Risk Funds

Following are the features of Low Risk Mutual Funds:

  • Risk Reward Ratio: Low risk funds invest in high rated securities. Though they are not risk-free, they offer optimal returns. In comparison to equity mutual funds, you do not have to worry about market volatility. For short durations, low risk funds are an ideal option for investment.
  • Asset Allocation: Low risk funds primarily invest in debt instruments. Therefore, the schemes offer optimal returns. Their asset allocation is across government bonds, T-bills, debentures, money market instruments, etc. The fund managers carefully assess different securities and choose the ones with good credit ratings and historical returns.
  • Types of Funds: Low risk funds have multiple schemes that serve different investment purposes. Liquid funds, ultra-short-term funds, gilt funds, dynamic bond funds are some of the types of low risk funds. Therefore, depending on your investment objective and goal, you can choose a suitable scheme for investment.
  • Investment Duration: Low risk mutual funds are short term investment options. Since the schemes invest in high rated and government securities, the returns are more or less stable.
  • Investment Objective: The objective of low risk funds is to generate optimal returns with capital protection. 
  • Tax Efficient: Investors in the highest tax bracket can invest in low risk mutual funds rather than bank deposits to save tax. One can enjoy the tax benefit in the long term, as debt fund investments offer indexation benefits.

Who Should Invest in Low Risk Mutual Funds?

  • Low risk funds have low volatility. Therefore, they are suitable for investors who have low risk tolerance levels or have objectives that need low volatility.
  • Investors who have a short term investment horizon (3 years or less) and who wish to avoid market volatility can invest in low risk funds.
  • Low risk funds are suitable for investors who wish to invest their idle cash for a short period of time. These schemes are an excellent alternative to a savings bank account.
  • With a variety of schemes under the low risk category, investors can choose funds that align with their investment objective.

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