Wise investments are the currency of the future. Amidst the constant tussle among rising indices of living costs, volatile market fluctuations, and the growing demands of the hectic 21st-century lifestyle, one has to ensure judicious savings that promise satisfactory returns but not at the expense of your risking your hard-earned income.
In such a scenario, the wisest avenue one can opt for is low-risk investment options in India. By venturing into such safe and profitable arrangements, the investor achieves a decent standard of financial growth and diversification of their investment portfolio, all while protecting their capital from the market force’s unpredictability.
Whether you’re a young working professional who has only started navigating the waters of earning and saving or you are nearing retirement and looking for safe avenues to divert funds, consider the following low-risk investment options available in India:
Why consider low-risk investments at all?
The investments you choose depends on your present reservations and future concerns. You can be someone who doesn’t want to enter into an arrangement that is riding on market fluctuations, or you might be waiting for the economic forces to stabilize after the global pandemic.
In that case, investments that are low on the risk factor but provide a steady source of decent income is your way out.
By devoting your surplus funds to such schemes, you can wait for the market to stabilize but not give up on diversifying your portfolio and strengthening prospects.
Without a doubt, Fixed Deposits are India’s favorite low-risk investment option because of their high-stability and respectable returns upon maturity. It is a time-tested structure of investing surplus funds and achieving growth without putting your hard-earned capital at risk.
Moreover, the investor is well-aware of what to expect once the Fixed Deposit tenure has reached its end. Fixed Deposit is an umbrella term. Within this genre of investment, you’ll find variants such as standard fixed deposits with a pre-decided tenure, fixed deposits for senior citizens, fixed deposits for tax-saving purposes, cumulative fixed deposits, and non-cumulative fixed deposits.
Fixed Deposits allow greater control over your investments. The tenure is adjustable, ranging from one month to more than a decade. The interest rates range from 6% to 8.25% and higher.
Most importantly, each Indian bank has different schemes and each comes with added benefits. After careful study of your goals, you can choose the bank and the Fixed Deposit most suitable for you
Public Provident Fund (PPF)
PPF is a Government of India-backed structure of diverting small funds and ensuring decent savings and annual tax relief. If you are aiming to build a good corpus by the time you retire but, at the same time, not venture into a structure that is too dynamic, then PPF is the ideal investment option. The interest rates, tenure, and low-risk nature contribute to the worthiness of PPF as an investment that is reliable with its results and protects capital from the ups and downs of the market.
Apart from PPF, there are two other kinds of Provident Funds: General Provident Fund (maintained by government institutions) and Recognized Provident Fund (applicable to all private organizations with more than 20 employees).
Currently, the rate of interest is 7.1% per annum, compounded annually.
The minimum period is 15 years and, as per your wishes, can be extended by blocks of 5 years. Another exciting benefit is that the investor can take a loan against his/her PPF between the 3rd and 5th year.
Post Office Investments
The Government of India’s Department of Post has several beneficial savings schemes that come with the sovereign assurance of the state and financial advantages, such as a high rate of interest, low-risk factor, and all of them being tax-exempt under Section 80C.
Moreover, investors have a wide range of choices as to where they can invest their funds. Some of the popular low-risk investment options available from the Post Office are as follows:
● Post Office Savings Account: 4% per annum
● Post Office Recurring Deposit: 7.2% per annum
● Post Office Monthly Income Scheme: 7.6% per annum
● Post Office Time Deposit (1 year): 6.9% per annum
● Post Office Time Deposit (2 years): 6.9% per annum
● Post Office Time Deposit (3 years): 6.9% per annum
● Kisan Vikas Patra: 7.6% per annum
● Public Provident Fund: 7.9% per annum
● Sukanya Samriddhi Yojana: 78,4% per annum
● National Savings Certificate: 7.9% per annum
● Senior Citizens Savings Scheme: 8.6%
Do remember that the rate of interest is reviewed every quarter by the Government of India.
Another favorite amongst the low-risk investment options available in India is Recurring Deposits. This is a unique, highly flexible term-deposit where you make monthly investments of an amount of your choice and expect decent returns. The bank offers you a pre-decided interest on the amount you invest at a specific frequency until the Recurring Deposit reaches the end of the pre-determined period.
In the end, you are paid the amount upon maturity and the accumulated interest. Although this isn’t a highly liquid scheme, it is productive to utilize any idle funds or surplus resources.
Apart from the guaranteed returns and negligible risk-factor, Recurring Deposits have a holistic advantage. As an earning individual, the presence of a Recurring Deposit account inculcates financial discipline as you know that you have to devote a portion of your earnings every month to invest in the scheme.
It is essential to differentiate between a Fixed Deposit and Recurring Deposit. In a Fixed Deposit, the individual invests a lump sum amount for a fixed tenure.
In Recurring Deposit, you have to give a fixed amount every month for a pre-determined period. There are differences in the minimum term and amounts that can be invested Investments are the need of the hour. However, it is understandable if one isn’t inclined or financially prepared to devote large portions of their income to schemes that ensure large gains but are high on the risk factor.
P2P is a low to medium risk investment that aims to connect individuals looking for safe credit options through unsecured personal loans. It is served through a technology-driven p2p lending platform that brings together those requiring credit with lenders.
The idea is to ensure profitability for both groups; the borrowers are evaluated based on their credit-worthiness, and investor funds are assigned to maximize the lender’s resources.
In P2P lending, the rate of interest varies between 20-24% per annum. The user has contact with reliable and verified borrowers and lenders.
Most importantly, the platform uses sophisticated technology to maintain the highest credit analysis standards and communication standards. The lender can enter into constructive negotiations with the borrower before closing in on the deal.
Given this constraint, the option isn’t to run away from investments. Instead, what is required is a careful evaluation of your future requirements and searching for investment options that protect your corpus while contributing to its growth. Simple
tips to help you invest wisely are as follows:
● Know what you want from your investments. Do not opt for schemes just because people you know have done the same. Choose an investment that will give you returns that enrich your life.
● Think about how long you can sustain an investment; whether you can afford to choose monthly investments like Recurring Deposits, or you prefer to invest a lump sum amount right at the beginning.
● Diversify your portfolio. This means that your corpus can be invested more than one way rather than repeating the same schemes time and again. By diversifying the types and sectors, you can ride out the risk factor and expect better returns. It also prevents your resources from suffering a blow when the market is down because you have other low-risk investments sorted out.
● Keep track of your investments. Most investors tend to oscillate between never checking what’s going on with the schemes and checking every day. Both aren’t the correct way to go about it. The ideal way is to strike a balance and keep track of what is happening regularly.
Investments are not terrifying or something to avoid. The idea is to be aware of the best options and know what you want.