Safe Low Risk Mutual Funds With High Returns In India
09 Jun 2025 8 mins Mutual Funds
In today’s volatile financial landscape, finding safe investment options with high returns is more crucial than ever. Many investors are keen on mutual funds that offer stability while also providing substantial growth potential. This article delves into the realm of safe low-risk mutual funds in India, exploring their features, benefits, and how they can fit into your investment strategy.
Understanding Mutual Funds and Their Risks
Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. However, not all mutual funds carry the same level of risk. Understanding the risk-return trade-off is crucial for investors seeking safe low-risk options. The risk associated with mutual funds can stem from market volatility, interest rate fluctuations, and credit risks associated with the underlying assets.
What Makes a Mutual Fund Safe?
Safe mutual funds typically invest in government securities, blue-chip stocks, or other low-volatility assets. They are managed by experienced fund managers who aim to provide steady returns while minimizing risk. The safety of a fund can be assessed through its historical performance, expense ratios, and the quality of assets in its portfolio. For instance, funds that maintain a higher percentage of their assets in government bonds or high-rated corporate bonds are generally regarded as safer investments.
Best Low Risk Mutual Funds in India for 2023
Here’s a curated list of some of the safest mutual funds that have demonstrated consistent performance and lower volatility:
1. Axis Bluechip Fund
This fund invests in large-cap stocks, providing stability and growth. With a 1-year return of approximately 20%, it stands as one of the top performers in its category. The fund focuses on companies with a market capitalization within the top 100, which are more likely to withstand economic fluctuations. Investors appreciate its low expense ratio of 1.78%, making it a cost-effective investment option.
2. HDFC Hybrid Equity Fund
Combining equity and debt, this hybrid fund offers a balanced approach to investment. It has a 1-year return of around 15%, making it a reliable choice for conservative investors. The fund allocates around 65% to equity and 35% to debt instruments, allowing investors to benefit from the equity upside while maintaining a safety net through debt securities. The fund's focus on large-cap stocks further reduces volatility.
3. ICICI Prudential Liquid Fund
Ideal for those seeking safety, this fund invests in short-term debt instruments. It offers liquidity and stability with minimal risk, making it suitable for parking funds temporarily. The fund's average maturity of less than 60 days ensures that it is less sensitive to interest rate changes, providing a stable return of around 4-5% annually.
4. SBI Magnum Low Duration Fund
This fund focuses on low-duration bonds, offering better returns than traditional savings accounts with relatively low risk. The expense ratio is also competitive at around 0.5%, making it an attractive option. It typically invests in bonds maturing in 6 to 12 months, allowing investors to take advantage of higher yields without exposing themselves to long-term interest rate risks.
Analyzing Returns: Highest Return Mutual Funds in 1 Year
When considering mutual funds, it's essential to examine their performance over various time frames. Here are some funds that have recently provided the highest returns:
1. Nippon India Small Cap Fund
This fund has shown remarkable growth, with a 1-year return exceeding 30%. While it carries higher risk due to its focus on small-cap stocks, it has proven to be a lucrative option for risk-tolerant investors. The fund's strategy of investing in companies with potential for rapid growth has paid off, especially in a recovering economy. Investors should be aware, however, that small-cap funds can exhibit high volatility.
2. Aditya Birla Sun Life Tax Relief 96
Offering tax benefits under Section 80C, this equity fund has returned around 25% over the past year, making it a dual-benefit investment. The fund primarily invests in large-cap and mid-cap stocks, balancing growth potential with stability. Its consistent performance and tax-saving benefits make it a popular choice among investors looking to optimize their returns while minimizing tax liabilities.
Expense Ratios: Why They Matter
The expense ratio is the annual fee that all funds or ETFs charge their shareholders. A lower expense ratio means more of your investment returns remain in your pocket. Here are some mutual funds with the lowest expense ratios:
1. UTI Nifty Index Fund
This fund tracks the Nifty 50 index and boasts a low expense ratio of around 0.1%, making it a cost-effective option for investors. By replicating the performance of the index, this fund offers broad market exposure without the high management fees associated with actively managed funds. It's particularly suitable for long-term investors looking to benefit from the overall growth of the Indian equity market.
2. Motilal Oswal Nifty 50 Index Fund
Another low-cost option, this fund has a similar expense ratio and provides exposure to India's top-performing companies. Its passive investment strategy allows investors to benefit from market returns, making it an excellent choice for those who prefer a hands-off approach. Additionally, the fund has consistently tracked its benchmark, reflecting its efficiency and reliability.
Finding Mutual Funds with Low NAV and High Returns
Investors often seek funds with a low Net Asset Value (NAV) as they can buy more units for a smaller investment, potentially leading to higher returns as the fund grows. Here are some options:
1. HDFC Small Cap Fund
With a low NAV and a focus on small-cap stocks, this fund has the potential for significant appreciation over time. Historically, small-cap stocks have outperformed large-cap stocks in bull markets, making this fund a compelling option for growth-oriented investors. However, it is essential to be cautious as small-cap investments can be subject to higher volatility.
2. Franklin India Smaller Companies Fund
This fund invests in small-cap companies with high growth potential and has shown a promising performance in recent years. Its investment strategy focuses on identifying companies with strong fundamentals and growth prospects, positioning it well for long-term investors. The fund's performance has been bolstered by the economic recovery and increasing consumer demand in various sectors.
Expert Opinions on Safe Investment Strategies
Financial experts emphasize the importance of diversification when investing in mutual funds. According to renowned financial planner Mr. Rajesh Kumar, "Investors should consider a mix of equity and debt mutual funds to balance risk and return." This strategy allows investors to enjoy the growth potential of equities while having the safety net of debt instruments. Diversification across different asset classes and sectors can significantly mitigate risks associated with market fluctuations.
Actionable Steps for Investors
To navigate the mutual fund landscape effectively, consider the following steps:
Assess Your Risk Tolerance: Understand your risk appetite before choosing funds. Consider using a risk assessment questionnaire to gauge your comfort level with volatility.
Diversify Your Portfolio: Invest across various fund categories to minimize risk. A well-diversified portfolio can help cushion against market downturns and enhance overall returns.
Monitor Performance: Regularly review your investments to ensure they align with your financial goals. Set specific benchmarks to evaluate performance and make adjustments as necessary.
Consult with Experts: Seek advice from financial advisors to tailor your investment strategy. Professional guidance can provide insights into market trends and help optimize your asset allocation.
Frequently Asked Questions (FAQs)
What are the safest mutual funds in India?
Some of the safest mutual funds include those investing in government securities and blue-chip stocks, such as HDFC Liquid Fund and Axis Bluechip Fund. These funds typically exhibit lower volatility and provide consistent returns.
How do I choose low-risk mutual funds?
Focus on funds with a strong track record, low expense ratios, and investments in stable assets. Research their past performance and consult financial advisors. Look for funds that have consistently outperformed their benchmarks over multiple timeframes.
Which mutual fund has the highest return this year?
Nippon India Small Cap Fund has shown impressive growth with returns exceeding 30% in the last year. Its focus on high-growth potential companies has contributed to its outstanding performance.
What is a low NAV mutual fund?
A low NAV mutual fund is one where the price per unit is low, allowing investors to buy more units. This can lead to higher returns if the fund performs well. Low NAV funds can be particularly appealing to new investors looking to build their portfolios gradually.
What are the benefits of low-risk mutual funds?
Low-risk mutual funds provide stability, lower volatility, and consistent returns, making them suitable for conservative investors seeking to preserve capital. They often serve as a foundation for a balanced investment strategy, particularly in uncertain market conditions.
Summary of Key Insights
Safe low-risk mutual funds offer stability and growth potential.
Consider funds with low expense ratios and a good track record.
Diversification is key to managing risk in your portfolio.
Regular monitoring and expert advice can enhance your investment strategy.
As you embark on your investment journey, remember that informed decisions lead to better financial outcomes. If you found this article helpful, consider sharing it with others or subscribing to our newsletter for more insights into the world of finance.
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Author - Abhishek Sonawane
Abhishek Sonawane, an MBA graduate from the prestigious Indian Institute of Management Visakhapatnam (IIMV), brings over ten years of experience in the finance domain. His extensive background includes various roles in financial management and strategy, providing him with a comprehensive understanding of the financial landscape. Abhishek’s expertise and dedication to financial education make him an authoritative voice in personal finance, helping readers make informed financial decisions.