Low-volatility mutual funds: Should you invest? Here's what experts say
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- Nifty 100 Low Volatility 30 Index delivered a CAGR of 13.1% versus the Nifty 50's 9.5% over three years, 11.7% versus 9.9% over five years, 13.6% versus 12.5% over 10 years, and 14.9% versus 12.1% over 20 years as of end-May 2026, according to FundsIndia research.
- Against the broader Nifty 500, the Nifty Low Volatility 30 Index was marginally behind over the three- and five-year periods but outperformed over the 15- and 20-year horizons.
- Rhishabh Garg, CEO of FundsIndia, said low volatility is one of several proven investment factors alongside quality, value, momentum and dividend yield that have historically delivered strong long-term outcomes despite phases of underperformance.
- Low-volatility mutual funds use statistical measures such as standard deviation and beta coefficients to identify stocks with more consistent price movements, and their portfolios typically tilt toward companies with steady earnings and established business models.
- Low-volatility funds may underperform during strong market rallies because they avoid high-volatility stocks and carry relatively lower exposure to sectors such as technology, small-cap companies and emerging investment themes.
- Garg said these funds suit first-time equity investors, retirees drawing down savings, and individuals approaching a financial goal within the next three to five years, recommending diversification across factors rather than reliance on low volatility alone.
Why it matters: With volatility driven by geopolitical tensions, inflation and shifting monetary policy, FundsIndia's data challenges the assumption that downside protection requires sacrificing long-term equity returns: the Nifty Low Volatility 30 beat the Nifty 50 by roughly 2.8 percentage points of CAGR over 20 years. Garg's caveat matters — he recommends diversifying across multiple factor strategies rather than concentrating in low-volatility alone.
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