What is a safe investment? Logically, we term an investment safe when it fetches a decent return and guarantees the asset’s return plus the interest thereon on maturity. However, everyone looks for high-returns low-risk in their investments. This combination is impossible because the lowest-risk investments cannot give high returns, and those with high returns can be highly risky. So, let us look for the best and safe investment within high returns and low-risk parameters. Here are some safe investment options in India.
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Points to note before investing
Here are the points that investors should note before investing in any investment option.
- Check out their risk appetite levels. If they can absorb high risks, they can go for investments that give the highest returns. On the contrary, if their risk appetite is low, they should settle for investments that provide low but guaranteed returns.
- The liquidity needs are crucial. Generally, long-term investments yield better returns. At the same time, the investment should be liquid enough for the investor to withdraw their investments in an emergency.
- Investors should consider their investment horizons. Short-term investments do not usually deliver good returns. The best investments are always in the long term.
- The investor should have clearly defined investment goals. For example, if you wish to invest in your child’s higher education, it pays to start your investment early.
Here are some investments usually considered safe but also offer decent returns.
Let us start with the most direct investment that almost everyone makes.
The Bank Fixed Deposit
Bank fixed deposits are considered among the safest investment options in India. They give decent returns, better than the savings deposit accounts. Bank FDs are liquid because you can access your money in an emergency. Banks also offer loans against your deposits to meet your short-term requirements. Bank deposits are available for periods starting from seven days to ten years. So, if you need a safe investment, there cannot be anything safer than a bank fixed deposit. However, it does not qualify as a high-return-low risk asset.
Public Provident Fund Account – PPF
While bank FDs are safe investment options, they do not provide social security. Besides, you have to invest lump-sum amounts in bank deposits. The interest received on bank deposits is taxable. You do not get tax concessions on your deposits. You can keep on listing various drawbacks. So, if you are looking for an investment option that overcomes all the disadvantages listed above, the PPF account should be ideal.
The PPF A/c allows you to invest in installments. It provides tax relief on your investments. The PPF is categorized as an EEE investment from the taxation viewpoint. It provides for building a retirement corpus that can act as social security. The returns on the PPF account are also better than bank FDs.
However, the PPF has its drawbacks because it is not a liquid investment compared to bank FDs. Nevertheless, it is a safe investment option.
National Pension Scheme – NPS
The National Pension Scheme is also a social security scheme that guarantees a decent pension for the investor after their retirement. This scheme envisages investors to contribute a minimum of Rs 6000 in a financial year towards the NPS fund. The best aspect of this scheme is that the investor can also deposit the amount in installments (for example, Rs 500 x 12 months). While the plan matures on the investor attaining 60 years, the investor can extend it to 70. It is a safe investment option because it gives 8 to 10% a decent return. Thus, the NPS is a low-risk investment.
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Unit Linked Insurance Plan
The ULIP is a safe investment option with decent returns options of investment. The best aspect of ULIP is that it is an insurance-linked investment plan. Therefore, this scheme provides security to your family while allowing your wealth to grow long-term. Secondly, tax concessions are also available on ULIP investments under Sec 80C of the IT Act. Hence, it is a low-risk and decent-return safe investment option.
Capital Guarantee Plan
The Capital Guarantee Plan is an improvement on the ULIP investment because it invests partly in debt and capital protection and partly in equity. Generally, the plan has a ten-year tenure with the premium payment restricted to five years.
The significant benefit of this plan is that it repays the entire premium collected from the investor at the time of the plan’s maturity. Besides, it provides additional benefits. So, the returns are decent and safe.
We have discussed five safe investment options in India that are low in risk but give decent returns. So, if you need the best and safe investment option, you can select from these five safe investment options.