Top 6 Safe Investments in India

Updated on: Jan 20th, 2023 - 12:36:58 PM

7 min read

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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

InvestmentReturn PotentialRisksSuitable for
Bank DepositsMediumNilRisk-averse investors
PPFHighNilRisk-averse investors
NPSHighMediumAll
GoldMediumNilAll
RDLowNilRisk-averse investors
GoI Savings BondsHighNilAll

 

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

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