Mutual funds have become increasingly popular over the years as a way to invest in a diversified portfolio of securities. However, some investors may shy away from mutual funds due to the perceived risk of losing money. This is where low risk high return mutual funds come into play. In this blog, we will discuss what low risk high return mutual funds are, their benefits, and some examples of these types of funds.
What are low risk high return mutual funds?
Low risk high return mutual funds are a type of mutual fund that invests in securities that have a lower risk of losing money, but still have the potential for higher returns. These types of mutual funds typically invest in bonds, preferred stocks, and blue-chip stocks. The goal of low risk high return mutual funds is to provide investors with a steady stream of income and capital appreciation over the long term.
Benefits of low risk high return mutual funds
- Lower risk: As mentioned, low risk high return mutual funds invest in securities that have a lower risk of losing money. This means that investors can feel more comfortable investing their money, as the potential for losing money is lower.
- Steady stream of income: Many low risk high return mutual funds invest in bonds, which provide a steady stream of income through interest payments.
- Capital appreciation: While low risk high return mutual funds may not have the potential for extremely high returns, they still have the potential for capital appreciation over the long term.
- Diversification: Mutual funds are inherently diversified, which means that investors can spread their risk across a variety of different securities.
Examples of low risk high return mutual funds
- Vanguard Short-Term Investment-Grade Fund (VFSTX): This mutual fund invests in investment-grade bonds with short-term maturities. The fund has a low expense ratio of 0.20% and has an average annual return of 2.51% over the past five years.
- Fidelity Strategic Income Fund (FSICX): This mutual fund invests in a mix of investment-grade bonds, high-yield bonds, and preferred stocks. The fund has a low expense ratio of 0.69% and has an average annual return of 3.94% over the past five years.
- T. Rowe Price Equity Income Fund (PRFDX): This mutual fund invests in blue-chip stocks with a focus on dividend income. The fund has a low expense ratio of 0.65% and has an average annual return of 11.43% over the past five years.
Conclusion
Low risk high return mutual funds are a great option for investors who want to invest in a diversified portfolio of securities with a lower risk of losing money. While these types of funds may not have the potential for extremely high returns, they can still provide investors with a steady stream of income and capital appreciation over the long term. Before investing in any mutual fund, it is important to do your research and consult with a financial advisor to ensure that the fund aligns with your investment goals and risk tolerance.
Read more useful content:
- How to invest in mutual funds
- All about mutual funds-types & importance
- The Power of SIP Investment in Mutual Funds
Frequently Asked Questions (FAQs)
What are low risk high return mutual funds?
Low risk high return mutual funds are a type of mutual fund that invests in securities that have a lower risk of losing money but still have the potential for higher returns. These funds typically invest in bonds, preferred stocks, and blue-chip stocks.
Are low risk high return mutual funds safe?
While low risk high return mutual funds are generally safer than other types of mutual funds, there is always some level of risk involved with investing. It is important to do your research and consult with a financial advisor to determine if a particular fund aligns with your investment goals and risk tolerance.
What is the typical return for low risk high return mutual funds?
The typical return for low risk high return mutual funds is generally lower than other types of mutual funds, but they still have the potential for higher returns than other low-risk investments like savings accounts or certificates of deposit (CDs). The average annual return can vary depending on the specific fund and market conditions.
What types of securities do low risk high return mutual funds invest in?
Low risk high return mutual funds typically invest in bonds, preferred stocks, and blue-chip stocks. These securities are generally considered to be less risky than other types of investments, such as small-cap stocks or high-yield bonds.
Can low risk high return mutual funds provide a steady stream of income?
Yes, many low risk high return mutual funds invest in bonds, which provide a steady stream of income through interest payments. These funds can also provide capital appreciation over the long term.
What are some examples of low risk high return mutual funds?
Examples of low risk high return mutual funds include the Vanguard Short-Term Investment-Grade Fund, the Fidelity Strategic Income Fund, and the T. Rowe Price Equity Income Fund.
Are low risk high return mutual funds a good investment for retirees?
Low risk high return mutual funds can be a good investment option for retirees who are looking for a steady stream of income and capital appreciation over the long term. However, it is important to do your research and consult with a financial advisor to ensure that the fund aligns with your retirement goals and risk tolerance.
How do I invest in a low risk high return mutual fund?
You can invest in a low risk high return mutual fund through a brokerage firm or a financial advisor. It is important to do your research and compare the fees and expenses associated with different funds before investing.
