10 Best Low Risk Investment Options

Investing wisely is like steering a ship through the financial sea. Let's explore the 10 best low-risk investment options available to Indian investors seeking financial stability. Each option comes with its unique features, pros, and cons. Remember, prolonged financial success lies in informed decision-making and a well-balanced investment strategy. 

Public Provident Fund (PPF) 

PPF, established in 1968, is a government-backed savings scheme. Originating to promote small savings, it has evolved into one of India's most trusted low-risk investment options. 

Key Features: 

• Interest rate is currently at 7.1%, reviewed quarterly. 

• 15-year lock-in period, with partial withdrawals allowed after the 7th year. 

• Both the investment and returns are exempt from income tax. 

Advantages: 

• Government-backed, ensuring principal and interest security. 

• EEE (Exempt-Exempt-Exempt) tax status. 

• Allows for account extension in blocks of 5 years after maturity. 

Disadvantages: 

• Longer commitment compared to other options. 

• Partial withdrawals are allowed but limited before the 7th year.  

National Savings Certificate (NSC)

Introduced in 1959, NSC was designed to encourage small savings among Indians. Over the years, it has remained a reliable low-risk investment avenue. 

Key Features:

• The interest rate is 7.7% currently, compounded annually. 

• Lock-in Period of 5 years. 

• Investments up to ₹1.5 Lakhs are eligible for tax deduction under Section 80C. 

Advantages:  

• Assures safety of the invested amount. 

• Certainty of returns over the lock-in period. 

• Eligible for tax deductions, enhancing post-tax returns. 

Disadvantages: 

• Limited liquidity during the investment term. 

• Interest is taxable but not paid out until maturity.  

Fixed Deposits (FDs) 

Fixed Deposits have been a popular choice for Indians since the establishment of banking systems. Over time, banks have refined FDs to offer competitive rates with varying tenures. 

Key Features:  

• Interest rate varies by bank, tenure, and type of FD. 

• Fixed tenure, ranging from 7 days to 10 years. 

• Tax deducted at source (TDS) on interest earned. Investments in 5-year FDs are tax-free.

Advantages: 

• Principal amount and interest are assured. 

• Various options to match different financial goals. 

• FDs can be opened with minimal paperwork, particularly if you apply for an FD on online platforms like Bajaj Markets.  

Disadvantages: 

• Interest income is taxable at the applicable slab. 

• Limited potential for high returns compared to riskier options.  

Government Securities (G-Secs) 

Government securities have been issued by the Reserve Bank of India since the early 20th century. These bonds serve as a way for the government to borrow money from the public. 

Key Features: 

• Interest rate is linked to prevailing market rates. 

• Lock-in period varies but is typically medium to long-term. 

• Considered virtually risk-free as they are backed by the government. 

Advantages: 

• Government Backing provides security of principal and interest. 

• Interest payments are fixed and periodic. 

• Tradable in the secondary market before maturity. 

Disadvantages: 

• Prices can fluctuate based on market interest rates. 

• Trading may incur transaction costs.  

Recurring Deposit (RD) 

Recurring Deposits, a variant of fixed deposits, have been a long-standing choice for risk-averse Indian investors. Introduced by banks to encourage regular savings. 

Key Features: 

• Interest rates are similar to fixed deposits, varying by bank. 

• Fixed tenure, usually ranging from 6 months to 10 years. 

• Monthly deposits make it a disciplined savings tool. 

Advantages: 

• Encourages regular savings habits. 

• Assures returns on the deposited amount. 

• Various tenure options to match financial goals. 

Disadvantages: 

• Limited potential for higher returns. 

• Interest income is taxable at the applicable slab.  

Gold Investments 

Indians have revered gold for centuries, making it a traditional and cultural investment. Today, various modern avenues make gold an accessible low-risk investment option. 

Key Features: 

• Can be physical gold, gold ETFs, or sovereign gold bonds. 

• Historically stable returns, with potential for appreciation. 

• Easy to buy and sell, especially in the form of ETFs. 

Advantages: 

• Adds a hedge against economic uncertainties. 

• Sovereign gold bonds offer capital gains tax exemption. 

Disadvantages: 

• Unlike interest-bearing investments. 

• Prices can be influenced by global factors.  

Liquid Funds 

Liquid Mutual Funds, introduced in India in the 1990s, have gained popularity as a short-term, low-risk investment option. 

Key Features: 

• Short-term, typically a few days to a few months. 

• Competitive returns, often outperforming traditional savings accounts. 

• Easy redemption, with no exit load in most cases. 

Advantages: 

• Choice to invest in highly liquid and low-risk debt instruments.  

• Principal protection with potential for moderate returns. 

• No lock-in period, allowing quick access to funds. 

Disadvantages: 

• Lower returns compared to riskier investment options. 

• Subject to interest rate and credit risk.  

Post Office Savings Schemes 

Post Office Savings Schemes have a long history in India, offering small savings avenues for people residing in both urban and rural areas. 

Key Features: 

• Includes schemes like Monthly Income Schemes (MIS), Time Deposits, etc. 

• Varying interest rates, often competitive with banks. 

• Government backing ensures safety of the invested amount. 

Advantages: 

• Widely available with a vast network of post offices. 

• Fixed returns with government backing. 

• Certain schemes offer tax benefits under Section 80C. 

 Disadvantages: 

• Limited liquidity during the investment term. 

• Interest income is taxable.  

Corporate Deposits 

Corporate deposits have been a part of the financial landscape in India, offering an alternative to bank fixed deposits. 

Key Features: 

• Offered by non-banking financial institutions and companies. 

• Varying interest rates, often higher than bank FDs. 

• Credit Rating is important to assess the issuer's financial health. 

Advantages: 

• Potential for higher interest rates. 

• Various tenure options to match financial goals. 

Disadvantages: 

• Subject to the issuer's financial stability. 

• Fixed tenure with limited withdrawal options.  

Systematic Investment Plan (SIP) in Mutual Funds 

SIPs gained popularity in the 1990s, offering a disciplined and accessible way for Indians to invest in mutual funds. 

Key Features: 

• Regular, periodic investment in mutual funds. 

• Averaging out market fluctuations over time. 

• Allows investments with small amounts at regular intervals. 

Advantages: 

• Encourages regular and systematic investing. 

• Reduces the impact of market volatility. 

• Managed by experienced fund managers. 

Disadvantages: 

• Subject to market fluctuations. 

• Dependent on the performance of the underlying mutual funds. 

 

By understanding the features, advantages, and disadvantages of these tools, you can confidently set sail toward financial security and prosperity. Prepared to take the lead and charge into the investment multiverse? Choose from a wide range of investment tools, from Mutual Funds to Fixed Deposits, on Bajaj Markets!