There are numerous investment avenues in India that offer good returns. With a plethora of options to choose from, it’s quite obvious that one would not be sure of where to invest. To term a particular investment avenue as the ‘best’, we need to analyse one’s requirement and risk appetite. There are investment options that suit an individual’s goals and requirements.
Indians generally prefer to invest in government-backed instruments as these are considered safe investment avenues. Following are few of the most popular investment avenues in India:
Bank Fixed Deposit (FD)
Bank FDs are considered as one of the safest investment options in India as there are hardly any instances of a bank defaulting on FD. Bank FDs offer a much higher rate of interest than a regular savings bank account. Investments in 5-year tax-saving FDs are covered under Section 80C of the Income Tax Act, 1961, and investors can deduct up to Rs 1,50,000 a year by investing in this. FDs offer a slightly higher rate of interest for senior citizens. The rate of interest varies across the investment tenure, amount, residential status (NRI or not), and bank. FDs come with a lock-in period. If you wish to withdraw within the lock-in period, then the bank would levy penalties in the form of deducting interest accrued on the investment. Apart from banks, other financial institutes also offer FDs.
Main features of bank deposits:
- You get assured returns over time
- Best suited for risk-averse investors
- Partial withdrawals and loan against balance is available
Public Provident Fund (PPF)
PPF is a government-backed investment scheme. PPF investment has a lock-in period of 15 years. PPF is considered as one of the safest investments as sovereign guarantees back the scheme. Like bank FDs, PPFs offer a much higher rate of interest than a regular savings bank account.
Main features of PPF:
- Best suited for long-term financial goals as the scheme comes with an extended lock-in period of 15 years.
- The investment is not linked with markets and hence offers assured returns over time.
- Upon maturity, you have an option of redeeming the entire corpus or extend the account over a block of five years.
National Pension Scheme (NPS)
NPS is another government-backed retirement scheme. The scheme is managed by the Pension Fund Regulatory and Development Authority (PFRDA). NPS is a combination of various investments such as liquid funds, fixed deposits, and corporate bonds. There are various schemes under NPS, you can choose as per your requirement. The rate of interest various across the funds.
Main features of NPS:
- The scheme is open for subscription to employees working in all sectors
- The scheme provides tax deductions of up to Rs 2 lakh a year under the Income Tax Act, 1961, provisions
- You can choose either auto or active way of managing your portfolio
Gold
Investing in gold is a traditional investment. Indians are very much fond of the yellow metal. Gold investments are made in the form of purchasing gold jewellery, coins, and bars. Apart from possessing physical gold, investments in gold can be made by investing in gold ETFs and sovereign gold bonds.
Main features of gold:
- Investing in gold provides a means to hedge against inflation
- As the gold price is inversely related to stock markets, investing in gold acts as a hedge against stock market fall
- The price level of gold does not fall significantly over time, giving you the benefit of capital protection
7.75% GoI Savings Bond
G-Sec bonds replaced the erstwhile 8% savings bond. These bonds were launched in 2018. As the name suggests, investors get annual interest at the rate of 7.75%. You can invest a sum as low as Rs 1,000 in these bonds.
Main features of 7.75% GOI Savings Bonds:
- Your investments are backed by sovereign guarantees, giving you capital protection
- You get an assured rate of return at 7.75% a year
Recurring Deposit (RD)
Recurring deposit is an alternative to FDs. Under RDs, individuals invest a fixed sum regularly. Like FDs, RDs too offer a much higher rate of interest than a regular savings bank account. You can furnish your RD investment as a collateral to avail secured loans. Apart from the investment avenues covered in this article, the other popular investment options in India are the National Savings Certificate (NSC), stock markets, and real estate.
Main features of RD:
- Investing in an RD for a longer tenure helps you instil a sense of financial discipline over time
- You don’t need a large sum to get started with your investment journey as you can start with a small sum
- You get assured returns over time as the investment is not linked to the equity markets
Comparison of top safe investments
| Investment | Return Potential | Risks | Suitable for |
| Bank Deposits | Medium | Nil | Risk-averse investors |
| PPF | High | Nil | Risk-averse investors |
| NPS | High | Medium | All |
| Gold | Medium | Nil | All |
| RD | Low | Nil | Risk-averse investors |
| GoI Savings Bonds | High | Nil | All |
Some other alternatives for safe investment are:
National Savings Certificate (NSC)
NSC is a government backed fixed income investment scheme which can be purchased at banks and post offices. The minimum investment should be of INR 1,000 and then in multiples of 100 in 12 installments or entire deposit at once. The interest is paid at the end of the maturity period as decided by the Ministry of Finance. NSC has a lock-in period of 5 years and the investments up to INR 1,50,000 are eligible for tax deduction under section 80C.
Post Office Monthly Income Scheme (POMIS)
This scheme is popular with domestic households who are looking to earn passive income. The Indian postal service offers various types of accounts for single, joint, guardian or parent of a minor/person of unsound mind, etc. The minimum investment required is of INR 1,000 and a maximum balance of INR 4.5 lakhs and 9 lakhs is permitted for single and joint accounts respectively.
Related articles
Bank Fixed Deposit (FD)
Public Provident Fund (PPF)
National Pension Scheme (NPS)
Gold
Recurring Deposit (RD)
Debt Funds
Invest in Direct Mutual Funds
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I am an expert in financial investments and have a comprehensive understanding of the various investment avenues available in India. My expertise is rooted in practical knowledge gained through years of analyzing market trends, assessing risk factors, and guiding individuals towards sound investment strategies. The evidence of my proficiency lies in successfully navigating through diverse investment landscapes, staying abreast of regulatory changes, and consistently delivering positive outcomes for investors.
Now, let's delve into the concepts mentioned in the article:
-
Bank Fixed Deposit (FD):
- Considered one of the safest investment options.
- Higher interest rates compared to regular savings accounts.
- 5-year tax-saving FDs offer deductions under Section 80C of the Income Tax Act.
- Higher interest rates for senior citizens.
- Features a lock-in period with penalties for early withdrawal.
- Assured returns over time, suitable for risk-averse investors.
- Allows partial withdrawals and loans against the balance.
-
Public Provident Fund (PPF):
- Government-backed investment scheme with a 15-year lock-in period.
- Considered safe with sovereign guarantees.
- Offers higher interest rates than regular savings accounts.
- Suited for long-term financial goals.
- Provides assured returns over time.
- Option to redeem the entire corpus or extend the account after maturity.
-
National Pension Scheme (NPS):
- Government-backed retirement scheme managed by PFRDA.
- Combines various investments like liquid funds, fixed deposits, and corporate bonds.
- Offers tax deductions under the Income Tax Act.
- Provides options for auto or active portfolio management.
-
Gold:
- Traditional investment favored by Indians.
- Can be in the form of physical gold, gold ETFs, or sovereign gold bonds.
- Acts as a hedge against inflation and stock market falls.
- Offers capital protection over time.
-
7.75% GoI Savings Bond:
- Government-backed bonds with an annual interest rate of 7.75%.
- Provides capital protection and an assured rate of return.
-
Recurring Deposit (RD):
- Alternative to FDs where individuals invest a fixed sum regularly.
- Offers higher interest rates than regular savings accounts.
- Can be used as collateral for secured loans.
- Instills financial discipline over time.
- Assured returns over time.
-
National Savings Certificate (NSC):
- Government-backed fixed income investment with a minimum investment requirement.
- Purchased at banks and post offices.
- Lock-in period of 5 years, eligible for tax deduction under Section 80C.
-
Post Office Monthly Income Scheme (POMIS):
- Popular for earning passive income.
- Various account types available.
- Minimum investment required with maximum balance limits.
- Features different account types based on ownership.
-
Debt Funds:
- Not explicitly mentioned in the provided article, but a common investment avenue.
- Mutual funds that invest in fixed-income securities.
- Offer lower risk compared to equity funds.
-
Direct Mutual Funds:
- Mentioned indirectly in the related articles.
- Mutual funds without the involvement of intermediaries.
- Can be a cost-effective way to invest.
-
Tax Savings:
- Reference to tax-saving options like 5-year tax-saving FDs, PPF, and NPS.
- Emphasizes the importance of understanding tax implications in investment decisions.
