An investor’s goal is to maximise profits on assets while minimising risk. They want to find the best investment plan where they can double their money in a few months or years with little or no risk. Unfortunately, there is no financial option that offers both high returns and little risk. There is a link between risk and reward. For example, bigger returns mean more risk, and vice versa. Low-risk investments provide investors with peace of mind since they are designed to avoid losses. Before deciding on an investment strategy, it is important to match your risk profile to the product’s associated risks. In this article, we are going to take a look at 10 low-risk stock market investment options.

When Should You Choose Low-Risk Investments Over High-Risk Investments?

You may wish to consider low-risk investing if you meet any of the following criteria:

• You have a portfolio full of risky investments and want to protect yourself.
• When you have an emergency fund, you need a place to keep it.
• You want to invest but are afraid of taking risks.

If you find yourself in any of the above scenarios, you can select one of the following alternatives.

1. Dividend paying stocks.

Dividends are regular financial payments made to shareholders by steady, profitable corporations. Investing in dividend-paying stocks might provide some degree of security in an otherwise volatile market. They can provide both fixed income and capital appreciation for investors.

Even if dividend-paying companies’ share prices don’t climb as rapidly or to the same heights as those of growth-stage firms, their dividends and stability make them attractive to investors. Choosing dividend-paying firms requires some caution, despite their low-risk nature.

2. Index ETFs

The idea of Index ETFs is very simple. ETFs are portfolios (or a basket of stocks bonds or commodities) that mirror the composition of an index, like S&P CNX Nifty or BSE Sensex. An ETF can be traded on an exchange which makes it attractive to a large number of investors.

The net asset value of the underlying stocks or commodities that the ETF represents determines the current trading value. If you’re looking for an easy way to diversify your portfolio through passive investing, without taking on too much risk, ETFs may be the answer.

3. Debt mutual funds

A debt fund is a type of mutual fund scheme that invests in fixed income instruments that provide capital appreciation, such as corporate and government bonds, corporate debt securities, and money market instruments, among other things. It’s a smarter option that seeks to outperform fixed deposits in terms of return.

They provide higher yields and more tax advantages. The interest earned on bank fixed deposits is taxed as part of an individual’s income, whereas capital gains on debt funds are taxed at the lower rates currently in effect.

4. Hybrid mutual funds

Depending on the investment aim, hybrid funds may invest in stocks, debt, or other asset types. These funds invest in a variety of assets to diversify their portfolios and reduce risk. Some hybrid funds have a larger equity ratio, while others have a higher debt exposure. Hybrid funds can outperform debt funds while being less risky than equity funds.

5. Unit linked insurance plans (ULIPs)

A ULIP is a type of insurance plan that combines investment and life insurance to safeguard your family financially in case of an unexpected event. The ULIP premium is split into two parts. Part of it goes to your insurance coverage, and the rest goes into the fund of your choice. The type of fund you invest in depends on your risk tolerance and investment objectives. ULIPs are therefore suitable low risk long-term investment options for you and your family.