Best Low Risk Mutual Funds in India 2026: Top 10 & Guide
What Low Risk mutual funds are, who should invest, key risks, and the top 10 funds with returns and risk data.
Low-risk mutual funds place most assets in debt instruments and low-volatility segments, aiming to protect capital with modest returns. They suit new and cautious investors with short-term goals. This guide covers what defines them, who they suit, benefits, and a top 10 list of low-risk funds from our data.
Key takeaways
- Low-risk funds put a significant share of assets in debt instruments and low-volatility segments.
- The potential for a hefty return is low, and returns are not assured.
- They suit new investors with limited risk appetite and short-term goals, including horizons under a year.
- Benefits include liquidity, potential for better returns than fixed deposits and possible tax efficiency.
- The top 10 funds below carry low riskometer labels and are ranked by an internal score.
What are low-risk mutual funds?
Low-risk mutual funds are investment options that carry comparatively low risk. A significant share of assets is allocated to debt instruments, and managers place assets in low-volatility segments, where the likelihood of earning a hefty return is also low.
Who are low-risk funds suited for?
They suit new investors who lack the knowledge to navigate other fund options safely and who have a limited risk appetite.
What should you consider before investing?
- Time horizon: investors with a horizon of less than a year can consider these funds for short-term objectives.
- Investment goal: evaluate your goals to decide how much to invest and for how long.
- Risk appetite: inflation risk can reduce expected returns, so stay alert to it.
- Past performance: check how the fund has done against a benchmark index over the past three years, and check the expense ratio.
- Credit rating: read the fact sheet for the duration and credit rating of the bonds held.
Advantages of low-risk mutual funds
- Short-term goals: well suited to goals within the next year.
- Minimal risk: low volatility and limited credit and interest rate effects, compared with other funds.
- Source of regular income in addition to protecting capital.
- Possible tax savings for higher tax slabs compared with fixed deposits, depending on the rules in force.
- Potentially higher returns than fixed deposits.
- Enhanced liquidity to access money during emergencies.
How are low-risk mutual funds taxed?
Tax depends on the fund type and holding period, with debt-fund rules differing by the date of purchase. Rules change, so check the current position or speak to a tax advisor.
Do you need KYC before investing?
Yes. No investor can start investing in mutual funds without completing KYC (Know Your Customer), a one-time process mandated under the Prevention of Money Laundering Act (PMLA) for every first-time investor. It can be done online through e-KYC, for example with an Aadhaar OTP and your PAN.
Top 10 Low Risk mutual funds ranked by an internal score
These are the top 10 Low Risk funds from our data, ranked by Invo Wealth's internal fund-quality score. The score itself is not shown, only the return and risk numbers behind it. This list covers funds across categories whose SEBI riskometer label falls in this risk band. A "--" means the fund has not completed that period or the data is unavailable. Some entries are different plan or option variants of the same scheme (for example Direct vs Regular, or Growth vs Bonus), so their figures can look similar.
Returns across 6 months to 5 years
Performance data as of 5 September 2026.
| Fund | 6M CAGR | 1Y CAGR | 3Y CAGR | 5Y CAGR |
|---|---|---|---|---|
| Parag Parikh Conservative Hybrid Fund | 3.47% | 5.51% | 9.34% | 9.26% |
| UTI Ultra Short to Short Term Fund - Regular Plan - Growth | 6.63% | 6.31% | 7.21% | 7.41% |
| UTI Ultra Short to Short Term Fund - Regular Plan - Discontinued Growth | 6.63% | 6.31% | 7.02% | 7.10% |
| ICICI Prudential Conservative Hybrid Fund | 4.91% | 3.57% | 8.33% | 7.86% |
| Franklin India Liquid Fund | 7.12% | 6.55% | 7.00% | 6.35% |
| UTI - Money Market Fund | 7.17% | 6.52% | 7.34% | 6.64% |
| SBI CONSERVATIVE HYBRID FUND | 7.38% | 5.48% | 8.12% | 8.24% |
| Axis Liquid Fund | 7.07% | 6.49% | 6.94% | 6.30% |
| UTI Ultra Short Term Fund | 6.70% | 6.08% | 6.80% | 6.69% |
| ICICI Prudential Overnight Fund | 5.19% | 5.21% | 6.02% | 67.39% |
Risk and consistency metrics
| Fund | ISIN | Volatility | Max drawdown (3Y) | Sortino ratio |
|---|---|---|---|---|
| Parag Parikh Conservative Hybrid Fund | INF879O01209 | 3.32% | -2.24% | 1.02 |
| UTI Ultra Short to Short Term Fund - Regular Plan - Growth | INF789F01OT9 | 0.58% | -0.20% | 0.73 |
| UTI Ultra Short to Short Term Fund - Regular Plan - Discontinued Growth | INF789F01331 | 0.57% | -0.20% | 0.08 |
| ICICI Prudential Conservative Hybrid Fund | INF109K01902 | 3.83% | -3.12% | 0.50 |
| Franklin India Liquid Fund | INF090I01LO3 | 0.23% | -0.01% | 0.04 |
| UTI - Money Market Fund | INF789F01PX8 | 0.51% | -0.15% | 1.53 |
| SBI CONSERVATIVE HYBRID FUND | INF200K01859 | 4.36% | -3.19% | 0.36 |
| Axis Liquid Fund | INF846K01412 | 0.21% | -0.01% | -0.89 |
| UTI Ultra Short Term Fund | INF789F01PM1 | 0.42% | -0.07% | -1.18 |
| ICICI Prudential Overnight Fund | INF109KC17E3 | 0.13% | 0.00% | -15.01 |
These are funds whose SEBI riskometer label falls in the low bands. Expect small differences in returns, so compare the expense ratio and consistency as well.
How to invest in Low Risk mutual funds
You can invest in these funds using the Invo Wealth app. Sign up, get complete portfolio insights and start investing in mutual funds that actually suit you.
Conclusion
Low-risk funds suit short-term money and cautious investors. They are not risk-free, so check inflation, costs and credit quality.
Frequently asked questions
What are low-risk mutual funds?
They are funds that carry comparatively low risk, with a large share of assets in debt instruments and low volatile segments, so expected returns are also low.
Who are low-risk funds suited for?
New investors with a limited risk appetite who lack the knowledge to navigate other fund options.
What horizon suits low-risk funds?
They can suit short horizons, including investors with less than a year in mind, for short-term financial objectives.
Are low-risk funds free of risk?
No. Inflation risk can reduce returns, and returns are not assured.
How can I invest in low risk mutual funds?
You can invest through a SIP or a lump sum. To invest in these funds, you can use the Invo Wealth app: sign up, get portfolio insights and start investing.
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. This article is for education only and is not investment advice. Past performance does not guarantee future returns. Invo Wealth is an AMFI-registered mutual fund distributor (ARN-368528).