Best Low Risk Investment Options in India

When it comes to the best investment options in India, hundreds of questions arise in our minds. Every investor wants the best investment options to be available to him/her. This is why smart investors always hunting for the best low risk investment options available in India.

The world is facing high inflation; Fed is raising the interest rates. However, choosing the best and right investment among the hundreds of options available is a difficult task. Also, it solely depends on one’s risk appetite.

What makes an investment a good option?

Now is the right time to start your investment journey, if you haven’t started yet. The key is to find the right investment based on your age, timeline, and risk-taking capacity. There can be several factors to measure the effectiveness of an investment option few are mentioned below.

• Freedom to invest and withdraw anytime
• Flexibility to invest any amount
• Safer risk-return proposition
• Custom investment period
• Tax benefits & other benefits

What is low risk investment?

Low risk investments are investments that are essentially safer than their correlatives. For instance, Stocks are low risk compared to options and bonds are less risky compared to stocks. Likely, Treasury bonds are less risky compared to corporate bonds.

If you are willing to opt for the low risk investment, your purchasing power will reduce over time. Thus, Low risk investments are better suited for short-term goals and investments or for your emergency needs.

Why choose the low risk investment options?

The investment options we take can differ according to our risk-taking capacity. We can take into consideration of Present and future situations. When we think about investing, we think about securing the maximum returns.

However, diversifying one’s portfolio with investment options will help in moving towards financial goals.

Here are the Best Low Risk Investment Options:

1. High-Interest Savings Accounts:

Savings account with high-interest rates can give the nominal amount of interest for the money you’ve deposited in a savings account. You need to do a bit of research, on which institution or the bank provides the competitive interest rates at no additional fees.

Therefore, depending on that you’ll get to earn a reasonable interest rate on your saving account in India. Also, a savings account is very safe to use as you’ll never lose money.

2. Fixed Deposits

Fixed deposits are undoubtedly the oldest method of investing and savings in India. It is offered in all the banks in India with guaranteed returns. It is one of the risk-free or low risk investment returns in India. The term period of the fixed deposits ranges from a minimum of 7 days to a maximum of 10 years.

It is also advisable to opt for public sector banks to ensure the money is safe. The investors can choose to invest in FDs as per their investment horizon.

3. Fixed Annuities

An annuity is a contract made with the insurance company that will pay a certain amount of income over time. and recurring income payments to the contract purchaser. There are many types of annuities; few can be structured in many ways like to pay over a fixed period of time or until the death of the client.

Your annuity amount becomes risky if the insurance company goes out of business. Fixed annuities pay a fixed number of interest rates over a fixed period of time. Annuities have huge surrender charges with the first year of investment. However, be aware of the surrender charges charged by institutions before investing and before surrendering the investments.

4. Post Office Schemes

The post office department of India offers various schemes that can help individuals. It creates the habit of regularly saving money. Returns given by Post Office Schemes are relatively higher than banks and Non-Banking Financial Companies (NBFC).

The limitation of investing in Post Office Schemes is that it has a 5 year lock-in period. An account can be opened with a minimum of ₹1000 and in multiple of ₹1000. A maximum of ₹4.5 lakhs in a single account and ₹9 lakh in a joint account need to be deposited. Thus, In a joint account, all the joint account holders will have an equal share in the low risk investment.

5. Public Provident Fund

PPF was introduced by the Ministry of Finance in the year 1968. It is well known long-term investment option. It comes with a fixed tenure of 15 years. However, it can be extended for a period of 5 years by the investor.

It also has premature withdrawals in the scheme. So, it is a win-win situation. It is a government-backed scheme. It is backed by sovereign guarantees that make it one of the safest investment options.

6. Debt Mutual Funds

Mutual Fund Schemes are suitable for investors’ equities and bonds. Investing in mutual funds offers long-term capital appreciation and returns. The returns offered by the mutual funds depend on the performance of the fund. It offers higher returns compared to other investment options in the market.

Equity mutual funds involve high risk however the returns are also high. This is suitable for people with high risk-taking capacity.

A debt mutual fund is considerably safe and has less risk compared to equity mutual funds. As a result, It gives steady returns on investment over a long period of time.

7. National Pension Scheme

The National pension scheme (NPS) is a long-term investment option. It is the retirement-focused low risk investment option available to all Indians and is managed by the Pension Fund Regulatory and Development Authority (PFRDA).

An individual can open an account with a minimum deposit of ₹500 in a tier-1 scheme or account.

Another scheme is where an individual needs a minimum deposit of ₹250 for a tier-2 account. However, tier-ii can be allowed if a tier-1 account is active in the subscriber’s name.

8. Treasury Securities

Treasury securities are treasury bills, notes, and bonds. When you buy Treasury securities you are buying the debt of the government. This is usually used to fund government projects.

These instruments offer short-term low risk investment opportunities for up to 1 year. The Government of India Provides 3 treasury bills via auction: 91-day, 182-day, and 364-day. The minimum amount of investment is ₹25000 and the amount increases to multiples of ₹25000. They are very less risky as issued by the Government of India.

 

Also Read: Science Behind Long-Term Investments