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Safe Investment Options in India

by tavaga

For making an investment, a lot of people seek out investment opportunities that will be secure, dependable, and protect them from risk. It is natural to secure the hard-earned money one has accumulated over the years while earning an investment return at the same time. Here the idea of safe investment options comes into the picture. A safe investment option is an investment with little or no risk involved. It is considered the best option for people who prioritize their financial security over capital growth. These low-risk investment options are particularly suited to senior citizens with a low-risk appetite and shorter time horizons. 

Here are the safest and risk-free investment options for people to make investments with the negligible risk involved.

  1. Savings Account: A savings bank account is a deposit account that you have with a bank. The money deposited in this account earns interest of around 3 to 4 percent. They are the safest choice for those who wish to make moderate returns on their investment as the money is not invested anywhere and there is no risk of losing money.

One should keep money in the savings account only for immediate liquidity requirements and for emergency needs as low interest is earned on it. Also, zero maintenance fee is charged if a certain amount of money is deposited in the account.

  1. Bank Fixed Deposit: Fixed deposits are considered the safest option by Indians for making an investment. It offers a higher rate of return on surplus funds than a savings account. According to Section 80C of the Income Tax Act of 1961, people can deduct up to Rs. 1,50,000 by investing in 5-year tax-saving FDs. Slightly higher interest rates on fixed deposits are offered to senior citizens. The rate of interest of the fixed deposits varies with the bank, amount invested, tenure of investment, etc.

Fixed deposits have a lock-in period. If you wish to withdraw a fixed deposit before maturity in case of any emergency, the amount can be withdrawn with a certain amount fee charged as a penalty. It also provides options for partial withdrawals and loans against balances.

  1. Recurring Deposit: The recurring deposit is most appropriate for investors looking for a secure investment choice who want to deposit a small fixed amount on a regular basis with the bank. The individual receives the lump-sum payout plus interest in a recurring deposit at the conclusion of the policy duration. This is a profitable alternative for investing in the short term since it encourages long-term saving habits in investors.

Some banks offer flexible recurring deposits where no fee is charged if the amount is not deposited for a particular month or if you want to withdraw the deposit before maturity.

  1. Post Office schemes: These are the investment options backed by the government, making them highly secure and requiring minimal paperwork to invest and enroll. The majority of these Post Office Savings Schemes are eligible for tax rebates on the deposit amount.

Some of the post office schemes include the Post Office Savings Account, National Savings Certificate (NSC), Senior Citizen Savings Scheme account (SCSS), etc.

  1. Public Provident Fund (PPF): It is one of the safest and most secure options for making long-term investments in India. The PPF account can be opened either at the bank or post office. It is a guaranteed investment with a lock-in period of 15 years which can further be extended after every 5 years. The amount can be borrowed against the balance in your PPF account if you ever need the money and can be withdrawn partially only after a period of 6 years.

The minimum premium amount to be invested annually ranges from Rs 500 to Rs 1.5 lakh which can be exempted from income tax. PPF offers an additional tax benefit under Section 80C of the Income Tax Act, with an approved deduction of up to Rs 1.5 lakh in a particular fiscal year.

  1. National Pension Scheme (NPS): NPS is a low-risk investment option, a retirement program backed by the government and managed by Pension Fund Regulatory and Development Authority. This provides relatively better returns than other investments like PPFs or FDs as it invests in a basket of financial instruments including equities, corporate debt, etc. Any subscriber to an NPS may claim a tax benefit up to the aggregate limit of Rs. 1.5 lakh.

Even when you retire, NPS enables you to live a financially independent life. Pension wealth accumulation increases over time with a compounding effect up until retirement. Due to the minimal account maintenance fees, the subscriber eventually receives a sizable advantage from the accrued pension wealth.

  1. Non-equity Mutual Funds or Balanced Funds: These are a low-risk investment option that ensures liquidity in case of financial emergencies. One can earn a relatively high rate of return from such funds as compared to bank fixed deposits. They include government bonds, debt funds, money market funds, etc. 

This type of investment is suitable for people who have short-term goals and also provides a tax benefit to those who fall under high slab rates.

Conclusion: Investing in a safe and secure investment option is important for people of various age groups. One should park a part of their savings in such safe investment instruments to get assured returns. However, diversifying your portfolio across risky and non-risky investments based on your risk appetite can help generate even better returns. It is best to invest a certain percentage of your income in safe investment options to ensure liquidity and availability of funds in case of any emergency in addition to investment in more risky assets in order to gain higher inflation-beating returns as per the risk appetite of the individual.

Investment OptionLock-in periodRate of Return (per annum)
Savings AccountNo2.7% to 6.5%
Bank Fixed DepositNo lock-in period(Tax saving FD: 5 years)For General citizens: 2.5% to 5.75%
For Senior citizens: 2.5% to 7%
Recurring Deposit3 days to3 months3.5% to 5%
Post Office schemeVaries from scheme4% to 8%
Public Provident Fund (PPF)5 years7.1%
National Pension SchemeUntil the age of 609% to 12%
Non-equity Mutual FundNovaries on the type of fund

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