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Best Mutual Funds with Lowest Risk
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List of Low Risk Mutual Funds in 2025
Top 10 Low Risk Mutual Funds to invest in 2025
Below are the low risk mutual funds in india:
1. SBI Overnight Fund Direct (G)
SBI Overnight Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 6.7%, a 3 Years return of 6.0% and a 5 Years return of 4.9%. The fund has an expense ratio of 0.1% and an AUM of ₹18568 crores as of 2025-01-16.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 0100.00% to other assets.
2. Kotak Equity Arbitrage Fund Direct (G)
Kotak Equity Arbitrage Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.2%, a 3 Years return of 7.2% and a 5 Years return of 6.2%. The fund has an expense ratio of 0.4% and an AUM of ₹54913 crores as of 2025-01-16.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates -0.55% to equities, 21.34% to debt and 79.21% to other assets.
3. HSBC Arbitrage Fund Direct (G)
HSBC Arbitrage Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.7%, a 3 Years return of 6.9% and a 5 Years return of 6.0%. The fund has an expense ratio of 0.3% and an AUM of ₹2423 crores as of 2025-01-16. It was Launched on 2014-06-30. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates -0.51% to equities, 21.90% to debt and 78.61% to other assets.
4. Axis Overnight Fund Direct (G)
Axis Overnight Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 6.8%, a 3 Years return of 6.1% and a 5 Years return of 5.0%. The fund has an expense ratio of 0.1% and an AUM of ₹8626 crores as of 2025-01-16. It was Launched on 2019-03-15. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 099.95% to debt and 0.05% to other assets.
5. Aditya Birla Sun Life Arbitrage Fund Direct (G)
Aditya Birla Sun Life Arbitrage Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.0%, a 3 Years return of 7.0% and a 5 Years return of 6.0%. The fund has an expense ratio of 0.3% and an AUM of ₹14115 crores as of 2025-01-16.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 0.40% to equities, 24.91% to debt and 74.69% to other assets.
6. DSP Overnight Fund Direct (G)
DSP Overnight Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 6.7%, a 3 Years return of 6.1% and a 5 Years return of 5.0%. The fund has an expense ratio of 0.1% and an AUM of ₹2614 crores as of 2025-01-16. It was Launched on 2019-01-09. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 06.52% to debt and 93.48% to other assets.
7. Nippon India Overnight Fund Direct (G)
Nippon India Overnight Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 6.7%, a 3 Years return of 6.1% and a 5 Years return of 5.0%. The fund has an expense ratio of 0.1% and an AUM of ₹6843 crores as of 2025-01-16. It was Launched on 2018-12-18. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 011.44% to debt and 88.56% to other assets.
8. ICICI Prudential Equity Arbitrage Fund Direct (G)
ICICI Prudential Equity Arbitrage Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.9%, a 3 Years return of 7.0% and a 5 Years return of 6.0%. The fund has an expense ratio of 0.3% and an AUM of ₹24369 crores as of 2025-01-16.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates -0.52% to equities, 24.22% to debt and 76.29% to other assets.
9. Aditya Birla Sun Life Overnight Fund Direct (G)
Aditya Birla Sun Life Overnight Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 6.7%, a 3 Years return of 6.1% and a 5 Years return of 5.0%. The fund has an expense ratio of 0.1% and an AUM of ₹8153 crores as of 2025-01-16. It was Launched on 2018-11-01. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 05.95% to debt and 94.05% to other assets.
10. Tata Overnight Fund Direct (G)
Tata Overnight Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 6.7%, a 3 Years return of 6.1% and a 5 Years return of 5.0%. The fund has an expense ratio of 0.1% and an AUM of ₹3945 crores as of 2025-01-16. It was Launched on 2019-03-27. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 01.61% to debt and 98.39% to other assets.
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 2025
Direct Plan
| Fund Name | 3 Year Returns | 5 Year Returns |
| Kotak Equity Arbitrage Fund Direct Growth | 7.1% | 6.1% |
| SBI Overnight Fund Direct Growth | 5.9% | 4.9% |
| Axis Overnight Fund Direct Growth | 5.9% | 4.9% |
| HSBC Arbitrage Fund Direct Growth | 6.7% | 6% |
| Aditya Birla Sun Life Overnight Fund Direct Growth | 5.9% | 4.9% |
Regular Plan
| Fund Name | 3 Year Returns | 5 Year Returns |
| Nippon India Arbitrage Fund Regular Growth | 6% | 5.3% |
| HDFC Overnight fund Regular Growth | 5.7% | 4.7% |
| SBI Overnight Fund Regular Growth | 5.7% | 4.8% |
| Kotak Equity Arbitrage Fund Regular Growth | 6.4% | 5.5% |
| ICICI Prudential Overnight Fund Regular Growth | 5.8% | 4.8% |
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.