Top 7 Moderate Risk Mutual Funds to Invest in 2025 for Stable Returns and Growth

Nowadays, in a dynamic economic environment, achieving the right balance between risk and return is a top priority, not just for individual investors but also for CFOs, treasury managers, and institutional decision-makers. Moderate-risk mutual funds deliver a blend of growth and stability that aligns well with both personal financial goals and corporate investment mandates.

Moderate risk mutual funds are strategically positioned between high-volatility equity investments and low-risk fixed-income products. Such types of funds are structured to deliver risk-adjusted returns, making them an ideal investment choice for institutional investors, CFOs, and corporate treasury teams aiming to balance growth objectives with capital preservation. 

For individual investors as well, they provide a disciplined, long-term solution. This In Depth blog shares insights on the best mutual funds with moderate risk, explains their operational structure, outlines key benefits, and presents a streamlined investment approach through platforms like 5paisa.

Here’s a curated list of some of the best mutual funds for moderate risk based on consistent performance, fund manager credibility, and asset allocation:

Note: Just because a fund performed well in the past doesn’t mean it will do the same in the future. It’s a good idea to talk to a qualified financial advisor before you invest.

What Makes These Moderate Risk Mutual Funds Ideal for Balanced Growth and Consistent Returns?

Each fund in this list has been selected based on key performance metrics, asset diversification, and fund management expertise, making them ideal for categorisation as best moderate risk mutual funds.

HDFC Balanced Advantage Fund stands out for its dynamic asset allocation model and large AUM base. It’s a favourite among investors seeking steady growth with built-in downside protection during volatile markets.

ICICI Prudential Multi-Asset Fund goes beyond traditional equity-debt balancing by including commodities like gold, enhancing diversification and reducing correlation risk, an ideal choice for those seeking a more robust asset mix.

Kotak Equity Hybrid Fund is known for its consistent returns and low expense ratio, making it a cost-efficient option for long-term investors who want moderate exposure to equities and stable returns from fixed income.

SBI Balanced Advantage Fund leverages tactical asset allocation to optimise returns and minimise losses, making it a well-rounded fund for investors looking for automatic risk management without frequent intervention.

Axis Aggressive Hybrid Fund, though relatively smaller in AUM, offers a higher equity exposure, making it suitable for investors with a moderately aggressive approach who still value the cushion of debt.

Mirae Asset Hybrid Equity Fund combines quality stock selection with disciplined risk control, appealing to investors aiming for long-term capital appreciation without the stress of market timing.

Edelweiss Balanced Advantage Fund brings algorithm-driven allocation into play, offering data-backed rebalancing between equity and debt. Its strong risk-adjusted performance makes it a smart choice for tech-savvy and analytical investors.

These funds have consistently demonstrated the ability to balance risk and reward, and their inclusion here is backed by credible data, long-term consistency, and fund house reputation. For investors and institutions alike, these are some of the best mutual funds for moderate risk to consider in 2025.

How Do Moderate Risk Mutual Funds Work?

Moderate risk mutual funds typically invest in a diversified mix of equities (stocks) and debt (bonds). This approach enables the fund to navigate market fluctuations more effectively than equity-dominant portfolios, while still delivering better returns than traditional fixed-income investments.

Here’s how they work:

• Dynamic allocation: Adjusts between equity and debt based on market trends
• Risk management: Built-in mechanisms to cushion downside during volatile markets
• Diversification: Across sectors, asset classes, and geographies in some cases

These funds are especially popular in hybrid categories such as balanced advantage funds and aggressive hybrid funds.

Features of Moderate Risk Mutual Funds

Moderate risk mutual funds come with distinct characteristics that cater to a wide audience of investors:

• Balanced Exposure: Combination of equity for growth and debt for stability
• SIP and Lump Sum Options: Flexible investment modes to suit varying risk appetites
• Professional Fund Management: Managed by experienced professionals using data-backed strategies
• Lower Volatility: Such funds are less impacted by market crashes compared to pure equity funds
• Moderate Returns: These types of funds typically offer 10–14% CAGR over the medium to long term

These features make mutual funds medium risk a medium-risk investment opportunity for both individuals and organisations seeking sustainable financial growth.

Advantages of Moderate Risk Mutual Funds

Investing in low to moderate risk mutual funds offers several strategic advantages:

1. Portfolio Stability
Combining growth and fixed-income securities ensures reduced fluctuations during volatile market cycles.

2. Better Inflation Protection
Debt returns alone often fail to beat inflation. Moderate risk funds help preserve purchasing power over time.

3. Tax Efficiency
Capital gains from these funds can be more tax-friendly, especially when held for the long term.

4. Ideal for Goal-Based Planning
Perfect for medium-term goals like buying a car, funding a child’s education, or business expansion planning.

5. Diversification 
It reduces risk by allocating investments across different sectors, minimising the impact of poor performance in any one asset class.
 

How to Start Investing in Moderate Risk Mutual Funds with 5paisa?

Starting your investment journey with 5paisa is simple, secure, and seamless:

Step-by-step:

1. Sign up on 5paisa with your PAN, Aadhaar, and bank details
2. Complete KYC online — fully digital and paperless.
3. Explore recommended moderate risk funds based on your financial goals.
4. Invest via SIP or lump sum with a few clicks.
5. Monitor your investments instantly with real-time updates available on the 5paisa dashboard.

5paisa offers curated fund lists, detailed risk analysis, and smart filters that help you explore the best medium risk mutual funds aligned with your risk appetite.

Risk of Moderate Risk Mutual Funds

Despite their balanced nature, moderately high risk mutual funds are not entirely risk-free.

Key risks include:

• Equity Market Risk: When equity markets decline sharply, even balanced funds may experience temporary losses.
• Interest Rate Risk: Bond prices may fall when interest rates rise, affecting the debt portion of the fund.
• Fund Manager Risk: Over-reliance on the manager's strategy could affect performance.
• Liquidity Risk: Some hybrid funds may invest in illiquid assets, negatively impacting the redemptions in extreme situations.

Understanding these risks will help you make more informed, confident investment decisions.

Factors To Consider Before Investing in Moderate Risk Mutual Funds

Consider the following key factors before selecting a mutual fund with moderate risk,

• Investment Horizon: Ideally, these funds suit someone who wants to invest in a 3 to 5 year timeframe.
• Risk Appetite: Moderate risk funds are not an ideal investment avenue for ultra-conservative investors.
• Expense Ratio: Lower fees ensure more of your returns are retained.
• Past Performance: Look for consistency over 3, 5, and 10 years, not just recent spikes.
• Fund House Reputation: Choose AMCs known for transparent governance and strong research teams.

Investors shall always align their investment choices with the overall financial plan and long-term goals.

Taxability for Moderate Risk Mutual Fund

Taxation depends on the fund’s equity-debt composition:

Equity-Oriented Funds (over 65% in equities):

• Short-Term Capital Gains (STCG): 20%
• Long-Term Capital Gains (LTCG): 12.5% (Exemption up to ₹1.25 lakh per year)

Debt-Oriented Funds: (Less than 65% in equities):

• Taxed at the investor’s slab rate for gains

Who Are These Funds Suited For?

Best moderate risk mutual funds are an ideal investment avenue for,

• First-Time Investors: Wanting market exposure without high volatility
• Salaried Professionals: Planning for mid-term goals like vacations, down payments, or higher education
• Retirees: Looking for a blend of income and capital appreciation
• Small Business Owners: Handling excess funds while maintaining controlled risk levels.
• HNI Clients: Those who want asset allocation without hands-on portfolio management

Such funds strike an ideal balance for those who want market participation without the stress of high-risk strategies.

Final Thoughts

In a volatile economic environment, moderate risk mutual funds present a practical, resilient option for investors who want to grow wealth without excessive exposure to the risk. Such funds offer a smart balance of safety and performance, an ideal combination in the financial markets. 

Whether you're an individual investor planning for the future or a business managing strategic reserves, the best moderate risk mutual funds offer a powerful blend of stability and growth.

Investors should take the first step towards their financial goals with platforms like 5paisa, where intelligent investing meets long-term vision. In smart investing, moderation isn’t about settling for less, it’s about making calculated choices that drive consistent, long-term success.