Top Low Risk Mutual Funds in India – Meaning, Risks, Benefits & More
Low-risk mutual funds offer minimal risk with stable returns. These SIP plans primarily invest in real estate and government bonds to mitigate the impact of inflation. By focusing on debt instruments, low-risk mutual funds strengthen your portfolio’s risk-reward balance. Knowing how to find the top low-risk mutual funds in India can shape your investment journey. This article lists the best low-risk SIP plans, their stock details, benefits, and challenges.
10 Best Low-Risk Mutual Funds Based on AUM
| Name | Sub Category | AUM (Cr.) | Expense Ratio (%) | CAGR 5Y (%) | Tracking Error (%) | Volatility (%) |
|---|---|---|---|---|---|---|
| Invesco India Arbitrage Fund | Arbitrage Fund | 20,029.39 | 0.39 | 6.30 | 0.95 | 0.98 |
| Kotak Equity Arbitrage Fund | Arbitrage Fund | 63,309.51 | 0.44 | 6.27 | 0.85 | 0.94 |
| Tata Arbitrage Fund | Arbitrage Fund | 13,629.48 | 0.31 | 6.25 | 0.94 | 0.92 |
| Edelweiss Arbitrage Fund | Arbitrage Fund | 14,307.17 | 0.38 | 6.21 | 0.91 | 0.94 |
| Nippon India Arbitrage Fund | Arbitrage Fund | 14,112.58 | 0.38 | 6.12 | 0.90 | 0.94 |
| Axis Arbitrage Fund | Arbitrage Fund | 6,299.25 | 0.33 | 6.08 | 0.89 | 0.92 |
| Bandhan Arbitrage Fund | Arbitrage Fund | 8,656.28 | 0.35 | 6.08 | 0.89 | 0.96 |
| UTI Arbitrage Fund | Arbitrage Fund | 6,899.22 | 0.28 | 6.05 | 0.90 | 0.93 |
| ICICI Pru Equity-Arbitrage Fund | Arbitrage Fund | 26,917.80 | 0.39 | 6.03 | 0.86 | 0.97 |
| SBI Arbitrage Opportunities Fund | Arbitrage Fund | 31,895.02 | 0.4 | 6.01 | 0.85 | 0.94 |
Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.
Note: The funds mentioned were taken from Tickertape Mutual Fund Screener on 20th October 2025.
- Plan: Growth
- 5Y CAGR: Sorted from Highest to Lowest
- SEBI Risk Category: Low
- Tracking Error: Mid
- Volatility: Low
🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.
Overview of the Top Mutual Funds In India with Low Risk
ICICI Pru Equity Savings Fund (Q-IDCW)
ICICI Pru Equity Savings Fund (Q-IDCW) invests in equity, debt, and arbitrage opportunities. It aims to deliver regular income and moderate capital growth with lower volatility through a balanced approach across asset classes.
ICICI Pru Equity Savings Fund (Q-IDCW Payout)
ICICI Pru Equity Savings Fund (Q-IDCW Payout) offers a mix of equity, debt, and arbitrage positions. It seeks to provide periodic income through payouts and long-term stability with controlled risk exposure.
ICICI Pru Equity Savings Fund
ICICI Pru Equity Savings Fund combines equity, debt, and arbitrage strategies to generate consistent returns. It focuses on delivering capital appreciation and stability through diversified exposure to multiple asset categories.
SBI Magnum Gilt Fund (IDCW-Payout)
SBI Magnum Gilt Fund (IDCW-Payout) invests primarily in government securities. It aims to provide regular income through periodic payouts while maintaining low credit risk and interest rate sensitivity.
SBI Magnum Gilt Fund
SBI Magnum Gilt Fund invests in high-quality government securities. It seeks stable returns with minimal credit risk, focusing on capital preservation and steady performance in varying interest rate conditions.
SBI Magnum Gilt Fund (IDCW)
SBI Magnum Gilt Fund (IDCW) focuses on sovereign debt instruments. It provides periodic income distribution and aims to deliver consistent returns through interest accrual and active duration management.
SBI Conservative Hybrid Fund (A-IDCW Payout)
SBI Conservative Hybrid Fund (A-IDCW Payout) invests mainly in debt instruments with limited equity exposure. It seeks regular income through payouts and stable long-term growth with controlled risk.
SBI Conservative Hybrid Fund (Q-IDCW Payout)
SBI Conservative Hybrid Fund (Q-IDCW Payout) combines fixed-income securities and equity exposure. It aims to offer quarterly income payouts while maintaining portfolio stability and moderate growth potential.
SBI Conservative Hybrid Fund (M-IDCW Payout)
SBI Conservative Hybrid Fund (M-IDCW Payout) invests in a mix of debt and equity instruments. It targets monthly income payouts along with steady returns from a diversified and risk-managed portfolio.
SBI Conservative Hybrid Fund
SBI Conservative Hybrid Fund maintains a conservative allocation to debt with limited equity exposure. It aims to provide income and long-term capital appreciation through disciplined portfolio management.
What are Low-Risk Mutual Funds?
Low-risk mutual funds aim to give stable returns with lower risk. They are not completely risk-free but usually provide better returns and tax benefits than traditional options like fixed deposits. These funds suit cautious investors who prefer steady growth with limited risk.
Debt funds, a common type of low-risk fund, invest in money market instruments, government bonds, and other low-risk securities. Within debt funds, investors can explore liquid mutual funds, dynamic bond funds, gilt funds, and ultra-short-term funds.
Taxation on Low-Risk Mutual Funds
Low-risk mutual funds are typically categorised as debt funds, and their taxation is based on the holding period and type of income (capital gains or dividends).
| Type of Tax | Condition | Tax Rate | Additional Details |
| Short-Term Capital Gains (STCG) | Units sold within 3 years | 20% (with indexation) or 10% (without indexation) | Applies to capital gains on units sold within 3 years. |
| Long-Term Capital Gains (LTCG) | Units held for more than 3 years | 20% (with indexation) | Applies to capital gains on units held for over 3 years. |
| Dividend Income | Income from dividends | Taxed as per income tax slab | TDS applicable if dividend exceeds ₹5,000 in a year. |
How to Invest in Low Risk Mutual Funds?
You can easily start to invest in low risk MF by following these steps:
- To invest in the best low risk mutual funds, you can visit a mutual fund investment platform such as smallcase.
- The next step is to research and identify the low risk mutual funds that match your financial goals. Tools like the Tickertape Mutual Fund Screener can help you filter and compare funds based on parameters such as returns, expense ratio, and fund size.
- Once you shortlist the funds, visit smallcase, log in, and search for the fund by name. You can then choose the investment mode, either a one-time lump sum or a low risk mutual fund SIP, and complete the process.
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade model portfolios of stocks/ETFs, that are based on a theme idea or strategy
- They’re created and managed by SEBI-registered investment experts (also known as smallcase managers)
- smallcase offers over 500+ stock portfolios, created by 200+ managers
Here are a few popular smallcases among new investors:
Disclosures for aforementioned smallcases
How Do Low-Risk Funds Work?
- Investment Strategy: Low-risk funds primarily invest in stable, low-volatility assets, such as government bonds, blue-chip stocks, and high-quality debt instruments. These funds focus on preserving capital while offering moderate returns.
- Asset Allocation: These funds usually allocate a higher percentage of investments to safer assets such as bonds or fixed deposits, with minimal exposure to equities or high-risk assets.
- Risk Management: Fund managers carefully select low-risk assets and maintain a diversified portfolio to reduce exposure to market fluctuations, helping stabilise returns over time.
- Returns: The returns in low-risk funds are generally more stable but may be lower than those in high-risk investments. These funds prioritise stability over high growth, making them suitable for conservative investors.
- Liquidity: Most low-risk funds offer high liquidity, allowing investors to access their investments when needed; however, it’s essential to review the specific fund’s withdrawal terms.
Features of Low-Risk Mutual Funds
- Optimal Risk-Reward Ratio: Very low-risk mutual funds invest in high-rated securities, aiming to strike a balance between risk and returns. Unlike volatile equity mutual funds, these funds may offer more stability, making them potentially suitable for short-term investments.
- Strategic Asset Allocation: Low-volatility mutual funds, which have low risk, primarily focus on debt instruments such as government bonds, T-bills, and debentures. Fund managers often carefully select securities with excellent credit ratings and a history of strong returns, which may help in ensuring optimal performance.
- Diverse Fund Types: Top low-risk funds offer a variety of schemes tailored to different investment goals. You can choose from options like liquid funds, ultra-short-term funds, gilt funds, or dynamic bond funds to align with your objectives.
- Short-Term Gains: The best low-risk mutual funds are designed for short-term, low-risk investments, emphasising stability due to their investments in high-rated and government securities.
- Tax-Efficient Choice: Investors in higher tax brackets may benefit from tax savings by choosing low-risk mutual funds over traditional bank deposits. These funds offer long-term tax advantages, thanks to the indexation benefits provided by debt fund investments.
Benefits of Investing in Low-Risk Mutual Funds
The top low-risk mutual funds offer a comprehensive range of benefits:
- Minimal Risk: These mutual funds eliminate credit risk, remain resilient to interest rate fluctuations, and mitigate inflation’s impact, although with minimal exposure.
- Tax-Efficient Investments: You may enjoy significant tax savings, especially if you are in higher income brackets, by leveraging long-term capital gains and indexation benefits.
- On-Demand Liquidity: Say goodbye to cash crunches during financial emergencies; you can access your funds swiftly.
To maximise your ROI and meet your investment objectives, considering these aspects carefully before making your investment decisions may be beneficial.
Risks of Investing in Low-Risk Mutual Funds
- Lower Potential Returns: Low-risk investments are known for their stability, but this also means they can typically offer lower returns compared to higher-risk investments. If you’re seeking substantial growth in your investments, you might need to consider the best mutual funds in India with potentially higher risk.
- Inflation Risk: One of the primary challenges of even the top mutual funds is the risk of not keeping pace with inflation. Inflation erodes the real value of your investments over time, and if your returns don’t outpace inflation, your purchasing power may decrease.
- Market Conditions: While low-risk investment options aim to minimise market volatility, they are not entirely immune to it. Economic downturns, interest rate fluctuations, or changes in market conditions can affect the performance of these funds, even if to a lesser extent than high-risk investments.
- Interest Rate Risk: Low-risk mutual funds often invest in fixed-income securities. When interest rates rise, the value of these securities may decrease, leading to potential capital losses. It’s essential to understand whether mutual funds are high or low risk.
Factors Affecting Investment in Low-Risk Mutual Funds
Investing in very low-risk investment funds involves several factors that may influence your choices and outcomes. Here are some key determinants to consider:
- Market Conditions: The overall economic and market climate significantly impacts the top mutual funds in india, including low-risk mutual funds. They typically perform well in stable economies. During times of uncertainty, they might outshine riskier investments due to their focus on stability and capital protection.
- Interest Rate Environment: Interest rates directly affect returns, especially for funds invested in debt instruments. Rising rates can decrease bond values, affecting the fund’s net asset value, while falling rates can increase bond prices, potentially leading to capital gains.
- Fund Management: The expertise and strategies of the fund manager play a critical role in the fund’s performance. Skillful managers who select high-quality securities and manage the portfolio effectively can significantly impact returns.
- Expense Ratios: You may want to keep an eye on expense ratios while/when choosing best SIPs for investment, as lower expenses could enhance your returns by allowing you to retain more of your investment gains over time.
- Tax Considerations: Understanding the tax implications, such as capital gains taxes and dividend distributions, specific to low-risk mutual funds may help you optimise your after-tax returns.
- Economic Indicators: Monitoring key economic indicators like inflation rates and GDP growth may provide insights into the economy’s health and its potential impact on your low-risk mutual fund investments.
Who Should Explore Low-Risk Mutual Funds?
Low-risk funds for 2025 are suitable for different types of investors, including:
- Conservative investors: Those who prioritise capital preservation over high returns may find these funds ideal for their stability and security.
- Retirees: Retired individuals seeking a steady income with minimal fluctuation can benefit from low-risk mutual funds, such as bonds or money market funds, for consistent returns.
- Short-term goal seekers: Investors aiming for short-term goals, like saving for a vacation or building an emergency fund.
- First-time investors: Beginners in the financial markets often prefer low-risk mutual funds due to their simplicity and stability, making them a comfortable entry point into investing.
- Income seekers: Investors focused on generating regular income rather than capital growth may explore low-risk mutual funds with high returns that prioritise dividend or interest income.
Note: However, investing in any stock is subject to market risk, and investors should conduct their own research before investing.
To Wrap It Up…
When it comes to very low-risk mutual funds, a thorough understanding of your investment options is crucial. This article has highlighted the key aspects of low-risk high return mutual funds to provide you with valuable insights. Low-risk investments offer stability, but it’s essential to assess your financial situation and seek guidance from a financial advisor. Diversifying your portfolio with low-risk high return SIP options is a smart step toward financial security. Stay informed about market trends and adapt your strategy to achieve long-term success.
Looking for a Loan Against Mutual Funds (LAMF)? Explore LAMF on smallcase –
You can now apply for a loan against mutual funds (LAMF) on smallcase. Explore the quick and paperless process with the following articles about the eligibility criteria, documents required, features, benefits and more on LAMF at smallcase!
Frequently Asked Questions(FAQs) on Low Risk Mutual Funds
Money market funds, liquid funds, and ultra short-duration funds are generally considered low-risk high return mutual funds. However, no category guarantees low risk, even the safest mutual funds in India are subject to market fluctuations. Therefore, investors should conduct thorough research or consult a financial advisor before investing.
Assessing a mutual fund’s risk involves considering several factors:
– Standard deviation, which measures volatility.
– Beta, which gauges market sensitivity.
– Historical performance in varying market conditions.
These parameters help understand how the fund manages risk.
Low-risk mutual funds primarily focus on preserving capital and delivering steady returns. While some low-risk funds may achieve moderate long-term growth, their primary objective is to avoid substantial losses, making them a good choice for low risk SIP investment.
When choosing low-risk mutual funds, consider factors such as your investment horizon, goals, historical returns, and fund managers’ experience. A balanced approach will help you select the right fund based on your financial needs and objectives.
Mutual funds come with various risks, including market fluctuations, which can affect returns. Even the safest mutual funds are subject to risks. Debt funds face the possibility of issuers defaulting, and interest rate changes may impact bond funds. Liquidity risk and inflation can also reduce returns over time.
