Low-volatility mutual funds have emerged as a strategic option for investors seeking to reduce portfolio fluctuations while maintaining equity exposure. According to reports from Mint, these funds invest in stocks that have historically experienced smaller price swings than the broader market, using statistical measures such as standard deviation and beta coefficients to identify companies with more consistent price movements over time. The portfolios typically favour companies with consistent earnings, strong business models and a track record of navigating market volatility, while remaining subject to equity market risks.
Recent market conditions have increased investor interest in low-volatility strategies due to heightened volatility from geopolitical tensions, inflation, changing monetary policies and economic slowdowns. As reported by Mint, the Nifty 100 Low Volatility 30 Index has demonstrated competitive long-term performance, outperforming the Nifty 50 across major time periods as of end-May 2026. The index delivered a CAGR of 13.1% versus 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. Against the Nifty 500, the low-volatility index was marginally behind over the three- and five-year periods but outperformed over the 15- and 20-year horizons.
According to Rhishabh Garg, CEO of FundsIndia.com, 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. As reported by Mint, the downside protection comes with trade-offs, as these funds may underperform during strong market rallies due to their avoidance of high-volatility stocks and relatively lower exposure to technology, small-cap companies and emerging investment themes that often lead bull markets. Garg emphasized that the strategy focuses on smoother compounding that keeps pace over the long run rather than giving up returns for safety.
Low-volatility mutual funds may suit investors who want equity exposure but are uncomfortable with sharp market swings, according to Mint reports. Garg identified these funds as suitable for first-time equity investors, retirees drawing down their savings and individuals approaching financial goals within the next three to five years. For investors seeking equity exposure without experiencing the full impact of market volatility, these funds offer a more measured investment approach that aims to help investors stay invested through periods of uncertainty by reducing portfolio fluctuations, though they may not deliver the highest returns during strong market rallies.
