To ensure a comfortable financial future, investing with discipline is a powerful tool for creating wealth. Faced with a variety of investment opportunities, even conservative investors can be overwhelmed. Fortunately, there are a variety of investment options that promise low risk and stable returns, allowing savers to accumulate wealth gradually without taking undue risks.
In this article, we’ll take a look at some low-risk investment options and how they can help you grow your wealth steadily while keeping your risk levels low.
Fixed Deposit (FD)
Term Deposits or FDs are one of the most popular investment options for low risk investors in India. FDs are offered by banks and financial institutions and are offered at a fixed interest rate for a predetermined period. FD interest rates vary by contract term, deposit amount and type of financial institution, but typically range from 5-7% per annum.
Bank FDs, which are generally considered safer, have lower interest rates compared to those offered by non-bank financial institutions. Cooperative bank deposits are generally riskier than deposits at term commercial banks such as SBI and ICICI Bank.
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FDs are considered safe as they offer fixed returns. Investors can also opt for a tax saving FD to help save tax under Section 80C of the Income Tax Act.
Public Provident Fund (PPF)
A Public Provident Fund (PPF) is a long-term investment option that offers attractive tax benefits and guaranteed returns. The scheme is backed by the government, so your investment amount is safe and completely safe.
The current PPF interest rate is 7.1% per annum and the investment period is 15 years. PPF also provides tax incentives under Section 80C of the Income Tax Act.
National Pension System (NPS)
The National Pension Plan (NPS) is a government-backed pension plan that provides a low-risk investment option for individuals wishing to build a foundation for their retirement. The regime gives investors the flexibility to allocate their funds among different asset classes such as equities, bonds and government bonds.
NPS offers tax benefits under Section 80CCD(1B) of the Income Tax Act, making it a popular investment option among low-risk investors. However, it is important to note that NPS investments are pegged until his age of 60 and there are certain conditions for withdrawals under age 60.
Debt investment trust
A debt mutual fund is a low to medium risk investment option that offers stable returns with minimal risk. These funds invest in bonds such as bonds, government bonds and money market instruments.
These funds are managed by professional fund managers who invest in a diverse portfolio of bonds to generate stable returns for their investors. Debt mutual funds typically return 6-8% annually, making them an attractive investment option for low-risk investors.
It is important to choose the right bond mutual fund according to liquidity and investment horizon. Liquid Funds and Ultra Short Funds are intended for short-term capital needs. Maturity and corporate bond funds make more sense if you have a long-term investment goal. These funds also offer the advantage of liquidity when needed.
When investing in credit risk funds, investors should carefully understand the risks involved.
post office savings system
The Post Office Savings Plan is considered one of the safest investment options for low-risk investors. The scheme is government-backed and provides a guaranteed return. Popular post office savings schemes include the National Savings Certificate, Kisan Vikas Patra and Post Office Monthly Income Scheme.
Post office savings plans typically have higher interest rates than bank FDs, making them an attractive investment option for low-risk investors looking for high returns without taking on undue risk.
Bonds and non-convertible bonds are also attractive bond options. They are usually issued by companies and pay interest annually. When investing in bonds, investors should only look at quality issuers. Credit ratings are he one of the mechanisms for investors to understand the quality of an issuer. Investors should be aware that although bonds are usually listed, liquidity is usually far from desirable. Therefore, bonds should be considered primarily with a view to holding them to maturity.
Diversifying your investment portfolio is important to reduce the risk associated with investing in a single asset class or investment option. By diversifying your portfolio across a variety of low-risk investment options, you can achieve a balance between stable returns and minimal risk. This is essential for long-term wealth building.
However, investors should be aware that over the long term, with consumer inflation averaging around 6-7%, all of these investment options will have low or even negative real returns. is needed.
If you prefer capital preservation and stable returns over high-risk investments, consider the low-risk investment options above.
(The author is Chief Business Officer of MarketsMojo)