In today’s ever-changing financial landscape, those seeking unwavering stability and peace in their portfolios prefer low-risk mutual funds and tax-saver funds. These investment vehicles open the door to cautious investors, providing a means to navigate the financial world with reduced apprehension.
Understanding the Attraction of Low-Risk Mutual Funds
Low-risk mutual funds are akin to a guardian angel in the world of investments. They pledge their commitment to safeguarding your capital while delivering consistent and predictable returns. How do they accomplish this? They do this by making astute choices to invest in assets renowned for their resilience and security.
The Allure of Low-Risk Mutual Funds
- Capital Preservation: At the core of low-risk mutual funds lies an unwavering commitment to shielding your initial investment. They achieve this by deploying your funds into assets with remarkable stability, such as government bonds, top-tier corporate bonds, and steadfast dividend-yielding stocks.
- Consistent Income: Many low-risk mutual funds extend a helping hand by providing investors with a consistent income stream, often in the form of dividends. This regular income flow can appeal to retirees or those seeking a dependable financial lifeline.
- Diversification: These funds are a beacon of diversity. They judiciously hold a diversified assortment of assets, thus dispersing risk far and wide. The outcome? A strategy that mitigates the impact of underperforming investments on the overall portfolio.
- Liquid Assets: Investors can buy or sell shares of these funds at the net asset value (NAV) on any business day. This liquidity translates into flexibility and effortless access to your invested capital.
Also Read: How to Choose the Best Debt Mutual Funds?
Types of Low-Risk Mutual Funds
- Money Market Funds: Money market funds stand as a fortress of stability. They invest in short-term, highly liquid securities, such as treasury bills and commercial paper. The objective is to maintain a steadfast NAV, offering low risk in exchange for potentially lower returns.
- Bond Funds: These funds allocate resources into a diversified collection of fixed-income securities, encompassing government bonds, municipal bonds, and blue-chip corporate bonds. They are significantly less turbulent than their equity counterparts and provide a consistent income stream via interest payments.
- Large-Cap Equity Funds: Large-cap mutual funds primarily invest in the stocks of well-established, financially stable, and large-cap companies. They are considered lower risk due to their stability but offer moderate returns. Investors seeking a balance between safety and growth may find large-cap funds suitable, as they tend to be less volatile than smaller-cap funds.
Best Low-Risk Mutual Funds
- Aditya Birla Sun Life Corporate Bond Fund: Aditya Birla Sun Life Corporate Bond Fund, an open-ended mutual fund, falls into the low-risk category with a focus on corporate bonds, banking, and PSU securities. It aims to provide optimal returns while maintaining high liquidity. As of July 31, 2023, the fund had a substantial size of Rs 17,961 crores. Its consistent track record has outperformed the Crisil Short-Term Bond Fund Index, making it a suitable option for investors seeking low-risk, stable returns with high liquidity.
- Kotak Nifty SDL Plus AAA PSU Bond Fund: It is a 60:40 Index Fund, by Kotak Mahindra Mutual Fund, offers a low-risk investment primarily in debt instruments, with 57.65% in government securities and 38.12% in low-risk securities. As of October 11, 2023, it has a NAV of ₹10.6935 and an expense ratio of 0.4%. The fund has shown competitive returns since its inception on October 13, 2022, delivering an annualised return of 6.97%.
- HDFC Money Market Fund: The HDFC Money Market Fund, offered by HDFC Mutual Fund, is a growth-oriented money market mutual fund with an NAV of ₹5,030.4163 as of October 11, 2023. The fund primarily invests in debt, including government securities and low-risk securities, making it suitable for short-term investors looking for an alternative to traditional bank accounts. Over the past year, it has delivered returns of 7.27%. For detailed information, consult official HDFC Mutual Fund documents.
Although these funds may not promise meteoric returns, they serve as guardians of your capital. Whether you’re a conservative investor or in quest of a well-balanced portfolio, these funds have the potential to steer you toward your financial destinations while ensuring a tranquil journey along the way.