Introduction: Why does it matter in 2025 to invest in Mutual Funds that are Low Risk and High Return?
Everyone, at this current juncture of economic uncertainty and market unpredictability, aspires for just one thing- good returns without taking on too much risk. That is exactly what low-risk, high-return mutual funds are meant to provide.
These mutual funds have been designed to optimize an equilibrium between security and performance that further gives the investor peace of mind, regular income, and capital growth going forward. Be it a new investor, a retired guy, or someone wanting to instrument a little diversification to the portfolio with lesser volatility, the best low-risk high-return mutual funds in India in 2025 are the ones to assist all in achieving their aspirations without the nerve-wracking high-risk equity markets.
The requirement for these funds now becomes most pertinent in 2025. The inflationary scare, interest rate adjustments, and ever-increasing global market tensions have sent investors searching for the safer investment means that can still deliver meaningful returns. This is where the top 10 low-risk high-return mutual funds in India come in, giving you access to well-managed, diversified portfolios with limited downside and consistent performance.
What Are Low Risk High Return Mutual Funds?
These are mutual funds aimed at producing fairly stable and consistent returns with only a small exposure to risky assets. They usually comprise:
- Large-cap equity funds that have been less volatile historically
- Hybrid or balanced advantage funds combining equity & debt
- Corporate bond or dynamic asset allocation funds with quality holdings
Why Choose These Funds in 2025?
- Economic Environment: In 2025, the still-unfurling economic implications of global slowdown along with inflation fears will shift investment behavior toward caution.
- Stability Matters: Investors now prefer funds that avoid sharp drawdowns and provide reliable income.
- Goal-Aligned: Perfect for retirement planning, children's education, or any medium-to-long-term goals.
- Smart Strategy: These funds employ a mix of debt, equity, and market timing to control risk and enhance returns.
Who Should Invest in Low Risk High Return Mutual Funds?
- New investors looking for a safe entry into the mutual fund industry
- Risk-averse individuals who prefer investing with capital protection
- SIP investors planning wealth creation with much lower volatility
- Retirees seeking a stable monthly income from their corpus
Top 10 Low Risk High Return Mutual Funds in India 2025: Quick Snapshot
| Fund Name | Category | 3-Year Return (CAGR) | Risk Level | Best Feature |
|---|---|---|---|---|
| Invesco India Arbitrage Fund | Arbitrage | 6.8% - 7.2% | Very Low | Low volatility, tax-efficient gains |
| Tata Arbitrage Fund | Arbitrage | 6.5% - 7.0% | Very Low | Ideal for short-term stability |
| Bank of India Overnight Fund | Overnight | 5.9% - 6.1% | Minimal Risk | Daily liquidity, capital preservation |
| Quant Multi-Asset Fund | Multi-Asset Allocation | 11.5% - 12.2% | Moderate | Equity + Gold + Debt diversification |
| SBI PSU Direct Plan | Thematic (Public Sector) | 13.0% - 14.5% | Moderate | Focused PSU stability & value |
| Kotak Bond Fund | Medium to Long Duration | 7.2% - 7.9% | Low | Debt-focused, steady interest income |
| Axis Floater Fund | Floater | 6.8% - 7.5% | Low | Protects against rising interest rates |
| ICICI Prudential Equity and Debt Fund | Aggressive Hybrid | 12.0% - 13.0% | Moderate | Growth with equity debt mix |
| Mirae Asset NYSE FANG+ ETF FoF | International ETF FoF | 16% - 18.5% | High (Thematic) | Tech exposure with global reach |
| LIC MF Low Duration Fund | Low Duration Debt | 6.4% - 6.8% | Very Low | Ultra-low volatility, stable returns |
In-Depth Fund Analysis
Fund 1: Invesco India Arbitrage Fund – Steady Gains Explained
Introduction: What Makes This Fund Stand Out?
Invesco India Arbitrage Fund is a low-risk, long-established mutual fund that aims at providing uninterrupted income through arbitrage opportunities in the equity market. Unlike traditional equity funds that are subject to full market volatility, this fund works on an equity hedging model by simultaneously buying equities in the cash market and selling the same in the futures market.
This cuts out directional market risk while making some money on the price differential, given mostly small, but stable, predictable returns. With a steadily growing Assets Under Management (AUM) and a steady performance record, the fund is one of the most frequently chosen investments among low risk investors by the year 2025.
Fund Snapshots
| Fund Name | Invesco India Arbitrage Fund - Direct Plan |
| Fund Category | Arbitrage Fund (Equity-Oriented Hybrid) |
| Risk Grade | Very Low (as per SEBI Risk-o-meter) |
| Three Year CAGR Return | 6.8% to 7.2% (in 2025 estimates) |
| Inception Date | April 30, 2007 |
| AUM (2025) | ₹9,500+ crore |
| Fund Managers | Krishna Cheemalapati, Pranav Gokhale |
| Benchmark | Nifty 50 Arbitrage Index |
| Minimum SIP Investment | ₹100 |
| Exit Load | 0.25% (if redeemed in 15 days or less) |
Investment Strategy in Depth
The fund follows a market-neutral arbitrage strategy and Cash-Future Arbitrage: It buys a stock in the cash market, sells it in the futures market, and locks in the price difference (spread).
- Low Equity Risk: The fund is thus insulated from market crashes or stock price swings. As both buy and sell orders offset each other, the fund isn't affected by market crashes or stock price swings.
- Debt Allocation: Unutilised funds are invested in high-quality debt and money market instruments to earn further income.
- Stable Yield Model: Arbitrage spreads may vary depending on market liquidity and volatility, but the fund tries to maintain a more or less uninterrupted stream of income over any length of time.
🟊 Tax Benefits Vs. Debt
One of the biggest advantages of arbitrage funds is their tax treatment.
Result: For investors in the higher tax brackets, arbitrage funds do usually fetch higher post-tax returns than liquid funds or savings funds.
🟊 Real-World Example Cases
- Emergency Fund Parking: More suited for the short-term parking of excess funds with liquidity and safety.
- Cash Management for Corporates: Firms usually employ arbitrage funds while doing treasury works in order to optimise returns over current accounts.
- Tax-Efficient Alternative to Fixed Deposits: Investors wanting FD-like stability with better tax efficiency find a better option in arbitrage funds.
Performance & Consistency
Volatility: Negligible Return Fluctuation: Narrow band, ideal for predictable income seekers Drawdown Risk: Practically zero due to full hedging
Expert Commentary
"Invesco India Arbitrage Fund is one of the consistent performers in its category. Its tighter risk measures, well-managed liquidity and intelligent hedging make it the preferred choice in all market conditions."
- Independent Mutual Fund Analyst, 2025
Pros and 
Cons
| Pros | Cons |
|---|---|
| Ultra low-risk, market-neutral strategy Equity taxation benefits Better than FDs in post-tax returns Ideal for parking short-term surplus |
Not suitable for long-term aggressive wealth growth Arbitrage spreads may be compressed in low-volatility times Returns generally capped below equity/hybrid funds Short-term capital lock-in (~15 days) |
Final Verdict: Who Should Invest?
This fund is for: Investors with low to zero risk tolerance, those seeking short-term capital safety with better than FD returns, HNIs and salaried professionals looking for tax-optimised alternatives to liquid funds, and retirees in search of a steady income route.
Bottom Line
The fund is a very good choice for those parking their money in the safest places in 2025, with the possibility of some returns above the savings account interest. It is not meant for wealth management, but for wealth preservation and low-risk steady returns; it is one of the best amongst the best low risk high return mutual funds in India today.
Fund 2: Tata Arbitrage Fund-Why It's a Safe Bet
Introduction: Consistent, Conservative, and Clean Returns
The low-risk Tata Arbitrage Fund invests in equity arbitrage strategies, aiming at stable and predictable returns through a market-neutral set of investments. Managed by Tata Asset Management, a name well earned for trust and discipline, this fund is intended for investors seeking short-term goals, capital Safety, and tax-optimized gains.
Steering by some good fund management, stringent risk controls, and low market volatility, this fund has swiftly grown to be among the top arbitrage mutual funds in India for 2025.
Fund Snapshot (2025 Outlook)
| Fund Category | Arbitrage Fund (Hybrid – Equity Oriented) |
| 3-Year CAGR (Est.) | 6.5% – 7.0% |
| Risk Level | Very Low |
| AUM (Assets Under Mgmt) | ₹8,000+ crore |
| Benchmark Index | Nifty 50 Arbitrage Index |
| Fund Manager | Murthy Nagarajan & Sonam Udasi |
| Min SIP Investment | ₹150 |
| Exit Load | 0.25% (if exited within 15 days) |
Investment Strategy: How the Fund Works
The Tata Arbitrage Fund captures risk-free returns through a classical arbitrage model by buying equity stocks in the cash segment and simultaneously selling them in the futures market at a premium. The difference in price (spread) is the return. To further improve on returns, the unutilized capital is also deployed in high-grade short-term debt and money market instruments.
Why It's a Safe Bet in 2025
- Stable Returns: This is an apt fund for conservative investors wanting a predictable yield without equity market exposure.
- Tax Efficient: Treated as an equity fund for tax purposes, which makes it better than the post tax returns from an FD or liquid fund.
- Brand Name: The long-standing reputation of Tata Mutual Fund adds another layer of assurance and reliability.
- Better than Savings A/c: It gives almost double returns to ordinary bank savings accounts with similar safety.
Performance Review
Consistency: Rarely deviates from the 6–7% band Volatility: Close to zero ideal for capital preservation Drawdown: Virtually non-existent
Ideal Use Cases
- Emergency fund parking
- Salary or bonus holding for 3–6 months
- Corporate treasury or idle business cash
- Low-risk SIPs for ultra-conservative goals
Pros & Cons
| Pros | Cons |
|---|---|
| Highly predictable returns Extremely low risk & market neutral Great for short-term investments Tax-efficient even in short duration |
Not suitable for long-term wealth growth Limited upside compared to hybrid equity funds Arbitrage spreads can shrink during calm markets Returns capped to market spread levels |
Final Verdict: Who Should Invest?
You should invest in Tata Arbitrage Fund if you are a risk-averse investor, want a better alternative to liquid or FD investments, are looking for a short-term tax-friendly parking solution, or are a retiree or salaried person managing short-term financial goals.
Bottom Line
In 2025, Tata Arbitrage Fund has so far emerged as a viable safe haven for investors wishing fund safety, low volatility, and reasonably tax-efficient returns. If you are seriously searching for a no-stress parking lot where your money will earn in silence while you are sleeping, then this fund is one of the most trusted and clever choices available today.
Fund 3: Bank of India Overnight Fund – Overnight Strategy Unpacked
Introduction: The Ultimate Safety Net for Your Money
In an uncertain interest rate environment, overnight funds have emerged as the safest investment choice for risk-averse investors. Among them, the Bank of India Overnight Fund stands out due to its strong institutional backing, flawless credit quality, and daily liquidity. This fund is ideal for investors who value 100% capital preservation, next-day access to funds, and better returns than a savings account all with zero exposure to market risk.
Fund Snapshot (As of 2025)
| Category | Overnight Fund (Debt) |
| Risk Level | Lowest (Virtually Zero) |
| 1-Year Return (2024) | 6.1% - 6.3% |
| AUM (2025) | ₹2,750 crore+ |
| Benchmark | CRISIL Overnight Index |
| Exit Load | None |
| Liquidity | T+1 (next-day credit on redemption) |
Investment Strategy: Overnight Lending Made Secure
The Bank of India Overnight Fund invests in debt instruments with a one-day maturity. Every evening, the fund deploys capital into ultra-short instruments such as Tri-party repo (TREPS), Reverse repos, and Collateralized borrowing & lending obligations (CBLO). Since all investments mature in 1 day, credit risk is negligible and interest rate sensitivity is nonexistent.
Why It’s One of the Safest Mutual Funds in India
- Zero Credit Risk: Instruments are typically backed by collateral or issued by RBI-regulated entities.
- No Interest Rate Risk: 1-day maturity protects you from rate changes.
- Better Than Savings Account: Returns nearly 2x that of bank savings accounts with daily liquidity.
- Regulated and Transparent: RBI-backed repo market ensures full compliance and trust.
Real-World Use Cases
- Business Cash Management: Companies park idle capital overnight to earn returns without risking principal.
- Emergency Fund: Ideal for funds that may be needed on a day's notice.
- Bridge Financing: Use between redemptions and re-investments to avoid unproductive idle time.
Pros and Cons
| Pros | Cons |
|---|---|
| Practically zero risk T+1 liquidity (next-day withdrawal) Excellent for short-term capital use Safe alternative to bank deposits |
Very low return potential Not for wealth building Taxed as debt (no equity advantage) Requires demat/mutual fund account |
Who Should Consider This Fund?
This fund is perfect if you want to safely park funds for a few days to a few months, need instant access to your money with a day's notice, run a business or manage cash flows and want risk-free interest, or are building an emergency fund.
Bottom Line
The Bank of India Overnight Fund delivers exactly what it promises: overnight safety, reliable returns, and high liquidity. If you're looking for a mutual fund that matches or beats your bank account without taking any market risk, this is one of the best low-risk mutual funds in India to consider in 2025.
Fund 4: Quant Multi Asset Fund - The Most Diversified Fund
Introduction: Balance, Growth & Protection All in One Fund
A fund that balances risk, growth, and at the same time preserves capital is what most investors are searching for. That is where the star shines for the Quant Multi Asset Fund. This is a dynamic hybrid mutual fund that unfolds a combination of equity, debt, and gold under a single very nimble portfolio. The fund uses its combination of multiple asset classes and active allocation management to maximize returns while minimizing downside.
Fund Snapshot (As On 2025)
| Fund Type | Multi Asset Allocation Fund (Hybrid) |
| Risk Level | Moderate |
| 3 Year CAGR (Est.) | 13% - 16% |
| AUM - Assets Under Mgmt | ₹2,000+ crore |
| Exit Load | 1%, if redeemed within 15 days. |
| Benchmark | Nifty 50 TRI + Crisil Composite Bond + Gold Index. |
Investment Strategy: Multi-Asset = Multi-Shield
The Quant Multi Asset Fund allocates dynamically among equities (40-65%), debt (20-40%), and commodities like gold ETFs (10-20%). What makes this fund stand out is Quant's data-based "VLRT" model (Valuation, Liquidity, Risk Appetite & Timing), which helps rebalance the portfolio proactively based on market signals.
Why It Ranks Among the Best Hybrid Funds in 2025
- Diversification Advantages: Less impact from any single asset class underperforming.
- Consistent Alpha Generation: Strong performance from a tactical and contrarian investing style.
- Crisis Protection: Debt and gold exposure cushion equity drawdowns.
- First-Time Equity Investors: Balanced for growth even during slowdowns.
Pros & Cons
| Pros | Cons |
|---|---|
| Dynamic allocation for volatility reduction Impressive 3-year returns (13–16%) Gold & debt provide downside cushions Taxed like equity, better than debt |
Needs medium-term horizon (3+ years) Can underperform pure equity in bull markets Active style leads to frequent changes Smaller AUM than larger peers |
Who Should Invest?
Invest in this fund if you would like equity growth with built-in protection, want a diversified fund that does not have to be monitored frequently, are looking for medium to long-term gains with reduced risk, or believe in tactical fund managers who sway with the market.
Bottom Line
The Quant Multi Asset Fund is an all-weather playing field for 2025. Its combination of equity, debt, and gold offers the best balance of risk, return, and peace of mind. It holds a strong place in any diversified strategy.
Fund 5: SBI PSU Direct Plan – Public Sector Stability
Introduction: Strength in Government-Backed Companies
Here, investors can put their money mostly in companies belonging to the Public Sector of India under the SBI PSU Direct Plan. The majority of these firms operate in strategically important industries like banking, energy, infrastructure, and defense, thus making them all investments with long-term growth potential, stability, and the payment of dividends.
Because of increasing government expenditure for capital assets and reforms ensuring efficiency in the operations of the PSUs, this fund is shaping itself into a low volatility equity bet for 2025.
Also Read: Morgan Stanley Mutual Funds in Energy Returns Snapshot of the SBI PSU Direct Plan (2025)
| Fund Category | Sectoral / Thematic – PSU Equity |
| Risk Profile | Moderately High |
| 3-Year CAGR | 18.7% |
| Assets Under Management | ₹3,800+ crore |
| Benchmark | S&P BSE PSU Index |
Investment Strategy: Focused PSU Allocation
The SBI PSU Direct Plan essentially invests in large-cap and mid-cap PSUs, focusing on Energy & Oil (ONGC, GAIL), Banking & Finance (SBI, Bank of Baroda), Power & Infrastructure (NTPC, Power Grid), and Defense & Transport (BEL, IRCON). The fund manager employs a blend of value investing and momentum screening.
Why This Fund is a Smart 2025 Pick
- Government Reforms Boost PSU Efficiency: Privatization, disinvestment, and modernization are unlocking value.
- Defensive Equity Strategy: PSUs have low volatility during market corrections due to stable earnings.
- Strong Dividends: Most PSUs give above-average dividend yields.
- Public Infra & Capex Push: Government’s focus on capital expenditure benefits these firms.
Pros & Cons
| Pros | Cons |
|---|---|
| Focused on high-quality PSUs Lower downside volatility High dividend yield adds cushion Strong growth during PSU revival cycles |
Sectoral fund – may underperform diversified equity Requires long-term horizon for returns Heavily dependent on government policy Not ideal for aggressive growth seekers |
Bottom line: Stability with Strong Potential
SBI PSU Direct Plan lives up to public sector stability with steady capital appreciation. Given the current scenario of reforms, disinvestment plans, and focus on infrastructure spending, this fund stands to gain substantially in the next 3-5 years.
Fund 6: Kotak Bond Fund – Reliable Income Generator
Introduction: Steady Income with Controlled Risk
In 2025, the Kotak Bond Fund is a fantastic choice for investors who look for predictable returns, secured value, and lower volatility. This medium-duration debt fund primarily invests in the highest quality fixed-income instruments, such as government securities (G-Secs), PSU bonds, and AAA-rated corporate debt. If you're looking for a safer-to-invest place in comparison with fixed deposits but with higher returns, this fund is a strong contender.
Fund Snapshot (As of 2025)
| Fund Type | Medium Duration Debt Fund |
| Risk Profile | Moderate (Interest Rate Sensitive) |
| 3-Year CAGR | 7.8% |
| YTM (Yield-to-Maturity) | 7.4% |
| AUM | ₹5,200+ crore |
| Benchmark | CRISIL Medium Duration Debt Index |
Investment Strategy: Quality + Duration Play
The Kotak Bond Fund adopts a balanced debt strategy by investing in top-rated papers like sovereign bonds and AAA PSU debt, actively managing duration based on the interest rate outlook, and avoiding credit risk by steering clear of low-rated instruments.
Why It Is So Reliable In 2025
- Returns Better Than FDs: With FD rates near 6–7%, this fund targets a 7.4%+ YTM.
- Credit-Safe Portfolio: Holding of Government and AAA-rated bonds.
- Professionally Managed Duration: Can profit from falling interest rates.
- Suitable For SIPs By Conservative Investors: Particularly retired or low-risk individuals.
Pros & Cons
| Pros | Cons |
|---|---|
| High-quality, credit-safe holdings Better returns than FDs for similar safety Low minimum investment (₹100) Ideal for SIP/STP & laddering strategies |
Returns affected if interest rates rise sharply No indexation benefit after 2023 Not for short-term (<1 year) goals Limited upside compared to aggressive debt funds |
Bottom line: Stability, Liquidity & Predictability in One
The Kotak Bond Fund offers nearly everything a conservative investor is after: steady returns with very little drama. If you are retired, close to a financial goal, or just want to reduce your total portfolio risk, this fund is perfect for you.
Fund 7: Axis Floater Fund – Inflation Beater
Introduction: Dynamic Returns in Rising Rate Environment
Specifically instituted for viability in varying interest rates, the Axis Floater Fund is a potent candidate for 2025. Unlike fixed-rate debt funds, floater funds primarily invest in floating rate instruments, which allows them to generate superior returns during a rising interest rate environment, making it easy to beat inflation.
Fund Snapshot (As of 2025)
| Fund Type | Floater Debt Fund |
| Risk Profile | Low to Moderate |
| 1-Year Return | 7.4% |
| 3-Year CAGR | 6.9% |
| AUM | ₹4,150+ crore |
| Exit Load | Nil |
Investment Strategy: Flexibility Meets Stability
Axis Floater Fund primarily invests in floating rate bonds, G-Secs, and high-quality corporate debt. The portfolio is structured to respond positively to repo rate hikes, a common tool used to control inflation.
Why Choose Axis Floater Fund?
- Inflation-Protected Returns: Outperforms static debt funds in rising rate cycles.
- Low Volatility: Maintains stability even in turbulent bond markets.
- Ideal for Laddering or STP: Park funds here before equity investment.
- No Exit Load: Great liquidity for short- or medium-term use.
Pros & Cons
| Pros | Cons |
|---|---|
| Low interest rate sensitivity Great short-term parking option Responds well to rising inflation High credit quality, low credit risk |
Slightly lower returns in falling rate cycles Not for high-growth seekers Taxed like regular income post-2023 Limited upside in stable rate periods |
Bottom line: A Smart Hedge Against Inflation Risk
Axis Floater Fund serves as a low-risk option that adjusts to changes in the interest rate environment. In a potentially inflationary year like 2025, it gives an edge against traditional debt products by not locking in a fixed rate.
Fund 8: ICICI Prudential Equity & Debt Fund-Balanced Growth
Introduction: The Best of Both Worlds-Equity Upside + Debt Stability
The ICICI Prudential Equity & Debt Fund is a hybrid mutual fund that strikes an optimal balance between the growth potential of equity instruments and the stability of debt instruments. As an aggressive hybrid fund, it invests about 65–80% in equities and the rest in high-quality debt. This makes it a suitable combination for moderate risk-takers who wish to create wealth over the long term while avoiding the full-blown risk of pure equity funds.
Also Read: Axis Small Cap Fund Direct Growth – NAV, Returns Fund Snapshot (As on 2025)
| Fund Type | Aggressive Hybrid Fund |
| Risk Profile | Moderately High |
| Three Year CAGR | 15.2% |
| AUM | ₹21,000+ crore |
| Equity Allocation | ~70% |
| Benchmark | Nifty 50 Hybrid Composite Debt 65:35 Index |
Investment Strategy: Balanced, Diversified, Tactical
The fund is known for its tactical asset allocation, investing in various equity sectors while utilizing high-quality debt. Fund managers actively switch ratios of equity to debt depending on market circumstances, keeping in mind capital preservation and risk-adjusted returns.
Why It Is a Smart Pick for 2025
- Less volatile than pure equity funds due to its debt cushion.
- Qualifies for equity taxation advantage despite hybrid structure.
- Perfect for long-term SIP investors and goal-based investing.
- Blends growth and income well for better risk-adjusted returns.
Pros & Cons
| Pros | Cons |
|---|---|
| Equity-debt balance reduces portfolio risk Tax treatment similar to equity funds Excellent SIP scheme with a great team Well established with credibility |
Not for short-term objectives May underperform in roaring bull markets Complex strategy to track manually Requires a 3-5 year horizon |
Bottom line: Wealth Creation Over Long Periods With Lesser Risk
The ICICI Prudential Equity & Debt Fund is an all-encompassing mutual fund for investors searching for steady, tax-efficient returns with less volatility than pure equity schemes. It fits beautifully into any goal-based portfolio, whether for a child's education, retirement, or simply wealth creation over a 5-10 year horizon.
Fund 9: Mirae Asset NYSE FANG+ ETF FoF – High-Tech Exposure
Introduction: Ride the Global Tech Wave with Indian Simplicity
If you're looking to tap into high-growth global tech giants like Apple, Amazon, Google, Meta, and Nvidia from the comfort of an Indian mutual fund, then the Mirae Asset NYSE FANG+ ETF Fund of Fund (FoF) is your gateway. This unique fund offers exposure to the NYSE FANG+ Index, which contains 10 of the world's most innovative tech companies.
It is an apt fund for Indian investors to get a taste of international diversification without requiring a U.S. brokerage account.
Fund Snapshot (As of 2025)
| Fund Type | Fund of Fund (FoF) – International Equity |
| Risk Profile | High |
| 3-Year CAGR | 24.1% |
| Benchmark | NYSE FANG+ Total Return Index |
| Top Holdings | Apple, Amazon, Meta, Tesla, Alphabet, Nvidia |
| AUM | ₹2,150+ crore |
What Makes It Unique
International Exposure: Gives Indian investors access to U.S.-listed tech leaders.- Concentrated Strategy: Focuses on just 10 high-growth stocks for higher alpha potential.
- Currency Advantage: Gains from INR depreciation against the USD.
- Ease of Investment: No need for LRS remittance or U.S. tax filings.
Why It’s a Smart 2025 Pick
- Tap into AI, Cloud, EV & Digital Trends via U.S. tech majors.
- Provides global diversification to hedge against domestic equity risk.
- High-return potential, especially in growth-focused market phases.
- Low-cost route to global equity.
Pros & Cons
| Pros | Cons |
|---|---|
| International diversification in a single fund Exposure to U.S. tech leaders No U.S. brokerage or tax filings needed Long-term wealth compounder |
High concentration (only 10 stocks) Volatile – expect sharp ups and downs Taxed at slab rate (post-2023 debt rule) Not for short-term conservative goals |
Bottom line: A Bold Bet on the World’s Best Tech Giants
The Mirae Asset NYSE FANG+ ETF FoF is ideal for investors that are convinced about the role of technology, innovation, and global scale. If you are able to take short-term volatility to achieve long-term spectacular growth, this fund deserves a place as a satellite in any portfolio.
Fund 10: LIC MF Low Duration Fund – Ultra Low Volatility
Introduction: Steady Returns with Minimal Risk
The LIC MF Low Duration Fund is designed for investors seeking capital preservation with steady, predictable returns over short to medium durations. As a low duration debt fund, it primarily invests in high-quality debt instruments with maturities between 6 to 12 months. This makes it ideal for those looking to park surplus cash, earn better returns than a savings account, and still maintain high liquidity with low volatility.
Fund Snapshot (As of 2025)
| Fund Type | Low Duration Debt Fund |
| Risk Profile | Low |
| 3-Year CAGR | 6.2% |
| AUM | ₹1,350+ crore |
| Yield to Maturity (YTM) | 7.1% |
| Benchmark | CRISIL Low Duration Debt Index |
| Exit Load | Nil (after 30 days) |
Investment Strategy: Liquidity Meets Safety
The fund primarily invests in Certificates of Deposit (CDs), Commercial Papers (CPs), Treasury Bills, and AAA-rated PSU and corporate debt. The focus is on low credit risk and high-quality issuers, which keeps returns stable and the portfolio resilient.
Why It’s a 2025 Favourite
- Safer Than Long-Term Debt Funds: Lower duration means lower interest rate risk.
- Better Than Bank FDs: Potentially higher post-tax returns.
- No Exit Load: Flexible withdrawal after 30 days.
- Ideal for STPs & Parking Funds: Commonly used for moving into equities gradually.
- Minimal Volatility: Even during monetary policy changes.
Pros & Cons
| Pros | Cons |
|---|---|
| Very low volatility and high-quality assets Ideal for short-term goals and liquidity Better returns than savings accounts No exit load after 30 days |
Lower returns than equity or hybrid funds Not for long-term capital growth Taxed at slab rate post-2023 Limited upside in stable rate scenarios |
Bottom line: Capital Preservation with Predictable Returns
The LIC MF Low Duration Fund offers a safe haven for conservative investors who prioritize stability, liquidity, and minimal risk. Whether you're parking a lump sum or building a buffer for future use, this fund provides a low-stress way to earn more than idle cash or traditional deposits, while keeping your capital intact.
Top 10 Funds – 2025 Comparison
 Fund Name |
 1Y Return |
 3Y CAGR |
 Fund Type |
 AUM (₹ Cr) |
 Expense Ratio |
|---|---|---|---|---|---|
| Invesco India Arbitrage Fund | 7.1% | 6.0% | Arbitrage Fund | ₹12,000+ | ~0.35% |
| Tata Arbitrage Fund | 6.9% | 6.1% | Arbitrage Fund | ₹8,900+ | ~0.33% |
| Bank of India Overnight Fund | 6.2% | 5.8% | Overnight Fund | ₹1,100+ | ~0.10% |
| Quant Multi Asset Fund | 22.8% | 20.1% | Multi Asset Allocation | ₹3,000+ | ~0.65% |
| SBI PSU Direct Plan | 32.5% | 23.7% | Thematic – PSU Equity | ₹6,800+ | ~0.80% |
| Kotak Bond Fund | 7.8% | 6.5% | Medium to Long Duration Debt | ₹9,700+ | ~0.40% |
| Axis Floater Fund | 6.9% | 6.2% | Floater Fund | ₹3,100+ | ~0.36% |
| ICICI Pru Equity & Debt Fund | 17.4% | 15.2% | Aggressive Hybrid Fund | ₹21,000+ | ~1.04% |
| Mirae Asset NYSE FANG+ ETF FoF | 31.5% | 24.1% | Fund of Fund (International) | ₹2,150+ | ~0.50% |
| LIC MF Low Duration Fund | 6.75% | 6.2% | Low Duration Debt Fund | ₹1,350+ | ~0.25% |
Visual Comparison: 1-Year Returns vs. 3-Year CAGR
How to Choose the Right Fund for Your Goals
Introduction: Aligning Mutual Funds with Your Life Plan
In its core, personal finance is about applying the right investment for the right purpose. While some mutual funds work best for retired investors, others may be terribly inadequate for the 25-year-old investor starting on a 10-year wealth journey. This makes goal-based investment highly relevant.
Think of mutual funds as a transport medium: fast vehicles for aggressive growth, comfortable vehicles for stability, and heavy vehicles for long-distance travel. Hence, one wrong choice can easily turn into irresponsible optimism or a chance taken for no purpose at all.
Also Read: 10 mutual funds that turned Rs 1 lakh into 5 lakhs in 5 years Expanded Table: Match Fund Type to Your Goal
 Life Goal |
 Time Horizon |
 Risk Level |
 Best Fund Type |
 Why It Fits |
|---|---|---|---|---|
| Emergency Fund / Cash Parking | 0–6 months | Very Low | Overnight & Low Duration Debt | Offers safety, liquidity, and better returns than a savings account |
| Short-Term Needs (Rent, Vacation) | 6–18 months | Low | Arbitrage or Floater Funds | Provides higher returns with almost zero volatility and easy withdrawal |
| Medium-Term Goals (Car, Downpay) | 2–5 years | Moderate | Bond Funds, Hybrid Funds | Combines moderate growth with capital protection and predictable income |
| Long-Term Wealth Creation (Retirement) | 5–10 years | Moderate–High | Multi Asset, Balanced Advantage | Grows wealth steadily with diversification across asset classes |
| Thematic & Global Exposure | 5+ years | High | Sector/Thematic, Global FoFs | Ideal for high-risk takers seeking thematic or international diversification |
| Retirement Income | 10+ years (post-retire) | Low–Moderate | Hybrid Conservative or Debt | Ensures steady returns with low drawdown during retirement years |
Detailed Insights: How to Choose Wisely
- 1. Start with Your Purpose: Always begin by stating your investment objective with utmost clarity. Is it for an emergency, a purchase, or building wealth? Clarity is the great simplifier.
- 2. Match Time Horizon: Short-Term (<1 year) requires safer debt funds. Medium-Term (1-5 years) suits hybrid or bond funds. Long-Term (5+ years) can accommodate more equity-oriented or thematic funds.
- 3. Know Your Risk Appetite: If you fear volatility, stick with debt and arbitrage. If you can handle moderate swings, balanced and multi-asset funds are for you. If you can stomach short-term losses for long-term gain, look to thematic and global funds.
- 4. Don't Rely Only on Past Returns: While insightful, past returns are not a guarantee. Look at investment philosophy, portfolio mix, fund management, and expense ratio. Check for consistency over several years, not just one good year.
- 5. SIPs Are a Must for Long-Term Goals: A Systematic Investment Plan (SIP) removes the temptation to time the market and builds a disciplined investment habit. Even a small amount invested monthly can create a sizeable corpus over 10–15 years.
Professional Tips: Avoid These Mistakes
Don't use equity funds for short-term needs you could lose money during market dips.- Don't mix goals in one fund create separate funds for each goal for better clarity.
- Don’t ignore taxes post-2023 rules have changed how debt fund returns are taxed.
- Review your portfolio annually and rebalance as goals or income change.
- Use tools like STPs (Systematic Transfer Plans) to gradually move money between fund types.
Bottom line: Choose to Win with Clarity
A well-chosen mutual fund is a very important step towards financial liberation. When you consider your goals, time horizon, and risk appetite, you ensure peace of mind with stable growth. The right opportunity is waiting for you; all you have to do is apply it smartly.
Step-by-Step Guide to SIP Versus Lump-Sum Investment
Introduction: Weightage on Investment Style Choice
One question that will forever be asked once you step into your mutual fund journey is: "Should I invest a small amount every month (SIP) or should I just invest everything in a lump-sum?" Both can be advantageous; it all depends on your cash flows, market conditions, and investment goals.
Full Comparison Between SIP vs. Lump Sum
 Investment Factor |
 SIP (Systematic Investment Plan) |
Lump Sum Investment |
|---|---|---|
| Investment Frequency | Fixed Monthly/Quarterly Contributions | Single Investment |
| Market Timing Risk | Low — You invest across different market levels using Rupee Cost Averaging | High — Total amount invested on current market level |
| Investor Discipline | Helps in regular investments | Strong emotional control and confidence required |
| Market Volatility Management | Practically good; it smoothens returns over time | Risky; holdings may go down if entered at a market peak |
| Best For | Salaried Professionals, New Investors, Goal Savers | Investors with a Large Corpus (Bonus, Inheritance) |
SIP Scheme Work: Stepwise
- Step 1: Set your Goal: Example: "I want ₹15 lakhs in 10 years for my child's college."
- Step 2: Choose an Appropriate Fund: Select a fund based on your risk appetite.
- Step 3: Use SIP Calculator: Use online tools to estimate the monthly investment needed.
- Step 4: Set Up Your SIP: Sign up on an app or with the AMC and link your bank for auto-debit.
- Step 5: Remain Consistent: Don't stop when the market falls! That's when SIPs deliver the best results by buying more units at a lower cost.
How Lump-Sum Investment Works: Step-by-Step Guide
- Step 1: Check source of capital: For example, a bonus worth ₹5 lakh.
- Step 2: Judge Market Conditions: Try to invest when markets are low or after a correction. Avoid investing a lump sum at an all-time high.
- Step 3: Choose the Right Fund: Equity funds for long-term goals; debt or arbitrage funds for short-term goals.
- Step 4: Employ STP: If you're unsure about market timing, invest in a Liquid Fund first and then do an auto-transfer (STP) to your target fund monthly.
- Step 5: Track & Rebalance: Review performance every 6 to 12 months.
Combo Strategy: Best Of Both Worlds
Smart investors know when to use SIPs and lump sums. For example, a monthly SIP of ₹5,000 in an Equity Fund, combined with a lump sum of ₹2 Lakhs from a bonus invested via an STP over 6 months. This strategy checks market volatility, builds wealth consistently, and ensures you do not miss growth opportunities.
Conclusion: Which One Should You Choose?
There is no absolute "best." It varies as per your cash flow, investment horizon, and risk mindset.
- SIP is apt for most of them: stress-free, consistent, and extremely good in times of volatile markets.
- Lump Sum works when you have excess money with a clear understanding of market circumstances.
- STP is the one which bridges between SIP and Lump sum to alleviate one's risk.
"Time in the market beats timing the market."
FAQs
1. Which is the safest type of mutual fund for low-risk investing?
Arbitrage funds, overnight funds, and short-duration debt funds are considered to be some of the safest funds. These fund types look for stable returns and capital protection rather than aggressive growth.
2. Would low-risk mutual funds give high returns?
Though low risk-high return sounds good, it is a relative concept. The funds in this category usually offer moderate and steady return levels, say 6-9% per annum, which outmatches savings accounts and FDs over time with little volatility.
3. Is SIP better in 2025 market conditions compared to lump sum?
Yes, for most investors. Owing to the constant volatility in the markets, SIP helps in averaging the costs over time. A lump sum would work only in an undervalued market or when an STP (Systematic Transfer Plan) is used.
4. For how long would I need to remain invested in order to earn an optimal return?
Ideally, at least 3 to 5 years for hybrid or multi-asset funds. In the case of arbitrage and overnight funds, even short horizons of 6 months to 1 year can work well.
5. What is STP, and when should I use it?
A Systematic Transfer Plan (STP) allows you to gradually transfer a lump sum amount into your target mutual fund. It is best when you wish to invest in the amount of ₹1-lakh−5 lakh but are uncertain about the timing of the market.
6. Are these low-risk funds good for senior citizens or retirees?
Yes. Overnight funds, low-duration debt funds, or hybrid conservative plans are just perfect for retirees looking out for stability, monthly income, and low risk to capital.
Action Plan: Next Steps to Boost Your Portfolio in 2025
After having understood the top low-risk, high-return mutual funds and how SIPs and lump-sum work, it is time to get into action in terms of implementation. A good investment plan provides for the safety of capital and the regular accumulation of wealth, especially in an unpredictable market like 2025.
Step 1: Define Your Financial Goals with Timeframes
Before picking any fund, it's crucial to lay down the 'why' of investing. Write down your goals and classify them as follows:
Short-term (0-3 Years): Funds for emergencies, vacation, and buying gadgets.
Medium-term (3-5 Years): Funds for buying a car, wedding expenses, or starting a business.
Long-term (5+ Years): Funds for retirement, child’s higher education, or buying a home.
Step 2: Match Funds to Your Risk Appetite
Not all low-risk funds are created equal. They are to be chosen depending on your risk tolerance and purpose. Choose at least 2-3 funds for balanced diversification across categories.
Step 3: Set Up a SIP Immediately - Don’t Wait for “Perfect Timing”
Systematic Investment Plan (SIP) is the simplest way to invest for every novice. Start with a minimum of ₹500/month. Use a SIP calculator to find the monthly investment needed to meet your targets, and then automate it through an investment app or AMC website.
Step 4: Got a Lump Sum to Invest? Do Smart STP
Use bonus, savings, or FD returns that are lying idle by parking the amount temporarily in a liquid or overnight fund. Then, utilize an STP to gradually transfer the amount to your target funds over 6–12 months. This hedges against market timing risk.
Step 5: Review and Rebalance Every 6 to 12 Months
Check up on fund performance every 6 to 12 months. If a fund consistently underperforms its benchmark, consider switching. Rebalance if your asset allocation deviates significantly from your original plan.
Step 6: For Every Investment, Maintain an Emergency Buffer
Ensure you have a practical low-risk, highly liquid fund covering 3-6 months of expenses to ensure you don’t have to break your long-term investments during emergencies.
Step 7: Be Consistent And Trust The Process
Never sell in a panic when the market corrects. Do not halt SIPs when returns seem negative; this is when SIPs buy more for you at a discount. Concentrate on your goals, not the markets.
"Volatility is temporary. Discipline is permanent."
Final Thought: Build Smart. Start Small. Stay Long
Low-risk mutual funds provide an absolutely assured way of investing for long-term growth without anxiety. Using a combination of SIP and lumpsum with STP and tracking regularly will help build a strong and goal-oriented portfolio in 2025.
"The secret is not to time the market; the secret is to give your money time in the market."
Disclaimer:
This article is solely for educational information purposes. All investments in mutual funds are subject to market risks. Past performances are not reflective of future returns. Please read the related documents of the schemes carefully before investing.
The names of mutual funds mentioned are based on publicly available data as of 2025 and does not constitute financial advice or recommendations. Always consult a certified financial advisor to assess suitability as per your individual risk profile and financial goals.
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