Top Low-Risk Mutual Funds in India for Short-Term Investments

Strategic Insights -

Investing in mutual funds can be a profitable way to grow your wealth, but it's essential to consider the level of risk involved. For those seeking low-risk investments, debt mutual funds are an excellent option. These funds typically invest in debt & money market instruments, treasury bills, and money market instruments, with the primary objective of capital preservation over capital appreciation. In this article, we'll explore the top 4 low-risk debt mutual fund subcategories that are perfect for short-term investments.

Liquid funds, ultra-short duration funds, banking & PSU debt funds, and corporate bond funds are the top low-risk mutual funds in India. These funds have delivered impressive returns while maintaining a low-risk profile. For instance, liquid funds have yielded an average return of 3.56% over 6 months and 7.33% in a year. Ultra-short duration funds have, on average, delivered 3.83% returns over 6 months and 7.70% in a year. Banking & PSU debt funds have clocked an average return of 8.66% over 1 year, while corporate bond funds have yielded an average return of 8.91% over 1 year.

Key Takeaways:

  • Liquid funds invest in low-risk, short-term, money market assets with a maturity of up to 91 days, making them the least riskiest option.
  • Ultra-short duration funds invest in higher-maturity debt papers and money market instruments with a Macaulay duration of 3 months to 6 months.
  • Banking & PSU debt funds invest in top-rated corporate debt instruments issued by Banks, PSUs, and PFIs, with a minimum investment of 80% in these instruments.
  • Corporate bond funds invest in the highest-rated corporate bonds with an average maturity profile of 1 to 3 years.

Statistics:

  • Income from Liquid Funds:

+ 6 months: 3.56%

+ 1 year: 7.33%

+ 2 years: 7.21%

  • Income from Ultra-Short Duration Funds:

+ 6 months: 3.83%

+ 1 year: 7.70%

+ 2 years: 7.47%

+ 3 years: 6.72%

  • Income from Banking & PSU Debt Funds:

+ 6 months: 4.43%

+ 1 year: 8.66%

+ 2 years: 7.84%

+ 3 years: 6.77%

  • Income from Corporate Bond Funds:

+ 6 months: 4.60%

+ 1 year: 8.91%

+ 2 years: 8.04%

+ 3 years: 6.86%

Sources:

  • Equitymaster.com, "Top Low-Risk Mutual Funds in India for Short-Term Investments"
  • IE Online Media Services Pvt. Ltd., "Investing in Debt Mutual Funds: Top 4 Low-Risk Mutual Funds in India for Short-Term Investments"
  • Contify.com, "Top Low-Risk Debt Mutual Fund Subcategories in India for Short-Term Investments"