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Best Investments with Low Risk and High Returns

Risk and return are two important aspects of an investment option. Generally, most investments that are low-risk tend to offer low returns. And on the contrary, investment options that are high-risk tend to offer higher returns. 

 

As an investor, it is natural for you to want to invest your hard-earned money in high-return, low-risk investments. But then, are there any such options available in India? Fortunately, there are many. Here’s an overview of 12 of the most popular high-yield, low-risk investments that you can consider investing in right now. 

  • Debt Mutual Funds

A mutual fund is an investment vehicle that pools money from multiple investors and invests it in a singular asset or a basket of assets. As the name itself signifies, a debt mutual fund is an investment vehicle that invests the pooled money in debt instruments. These include government securities, money market instruments and corporate bonds and debentures. 

 

The debt instruments that these mutual funds invest in are fixed-income generating options, which means that the returns tend to be more stable than what other investments offer. Although there are a few risks involved, such as interest rate risk and credit risk, they’re relatively low-risk overall. Also, you can reduce the risk further by opting for debt mutual funds that invest in instruments that carry high credit and safety ratings. 

  • National Pension System

The National Pension System (NPS) is one of the best high-return, low-risk investments in India right now. Established by the government of India through the Ministry of Finance, the NPS is a long-term retirement-focused savings plan. 

 

In this investment plan, you’re required to make contributions till you attain the age of 60. Once you attain the retirement age, you get to withdraw 60% of your accumulated corpus as a lump sum amount. The remaining 40% of the corpus is converted into annuity benefits and you receive regular monthly income for life.  

 

Since the plan is backed by the government of India, it carries zero risk. Meanwhile, the returns are market-linked and can be anywhere from 8% to 12% or more. 

  • Public Provident Fund

Another long-term savings avenue backed by the government of India, Public Provident Fund (PPF) is a high-return, low-risk investment option that is simple and hassle-free. According to this plan, you’re required to contribute a minimum of ₹500 in a financial year. There’s also a maximum contribution limit of ₹1.5 Lakhs per financial year.

 

Although the plan comes with a lock-in period of 15 years, you can opt to partially withdraw the corpus after the expiry of 5 financial years from the year of account opening. Here too, since the government backs the plan, there’s zero investment risk involved with PPF. 

 

The interest rate for the plan is fixed by the government of India and is revised every quarter. Currently, the PPF interest rate is set at 7.1% per annum for the October to December quarter (Q3) of the financial year 2022-23. 

  • Fixed Deposit

Fixed deposits have traditionally been one of the most popular investment options in India. FDs offer a lot of flexibility in terms of the tenor of the investment and the interest payout frequency. Also, fixed deposits aren’t just offered by banking institutions alone. In fact, many Non-Banking Financial Corporations (NBFCs) offer this facility as well, often at rates of interest that are more attractive than what many traditional banks provide. 

 

With the recent hike in the repo rates by the Reserve Bank of India, most banks and NBFCs have raised the interest rates on fixed deposits across the board. Also, the risk associated with fixed deposits is very low compared to equity and other market-linked investments.  

 

As for the safety aspect, in the case of bank FDs, you automatically get an insurance cover to the tune of ₹5 Lakhs from the Deposit Insurance and Credit Guarantee Corporation (DICGC). And in the case of NBFC FDs, you can choose to invest in plans that carry a high credit rating.  

  • Senior Citizens’ Savings Scheme (SCSS)

As the name itself signifies, the Senior Citizens Savings Scheme is another low-risk, high-return government-backed investment option for individuals above 60 years of age. An SCSS account can either be opened at a post office or at a bank. The scheme has a fixed tenor of 5 years, and you can invest a maximum of ₹15 Lakhs as one-time lump sum investment. You also get to prematurely withdraw the investment before the expiry of the tenor in case it’s necessary. 

 

For the October to December quarter (Q3) of the financial year 2022-2023, the government of India has set the interest rate on SCSS deposits at 7.4% per annum. The accumulated interest is paid out on a quarterly basis. You also get to enjoy tax benefits to the tune of ₹1.5 Lakhs under section 80C of the Income Tax Act, 1961. 

  • Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Launched very recently in 2017, the Pradhan Mantri Vaya Vandana Yojana is also a long-term investment option with zero investment risk for senior citizens. The returns on this investment avenue are also very attractive and far higher than what most other traditional investment options offer.

 

This investment avenue is operated by the Life Insurance Corporation of India (LIC) and is backed by the government of India. Similar to SCSS, you can invest a maximum of up to ₹15 Lakhs at an interest rate of 7.40% per annum. The interest is credited to you on a monthly basis, making PMVVY the perfect high-return, low-risk investment option for retired individuals looking for a regular source of income. 

  • Real Estate

Real estate investments are often considered to be cumbersome in nature. However, despite the many rules and regulations involved, investing in a good property can give you exceptionally high returns in the long run. 

 

Thanks to the ever-increasing popularity and demand for real estate spaces, the investment risk is fairly low. Depending on the location, you also get to enjoy decent levels of liquidity. However, before investing in real estate, it is advisable to first thoroughly analyse the property in question. 

  • Gold

Gold is another very popular investment option in India. The value of gold tends to be quite stable, which helps reduce the investment risk. Meanwhile, the scarce nature and high demand for this precious metal ensure that its value continues to appreciate in the long run. 

 

Another major advantage of this high-return, low-risk investment is that there are many ways to invest in gold. For instance, you could invest in gold jewellery, gold coins or bars, digital gold, or even Sovereign Gold Bonds (SGBs). 

  • Annuities  

Annuities are another example of low-risk, high-return investment options. They are typically offered by life insurance providers. There are two types of annuity plans that you can invest in - immediate annuity and deferred annuity. In the case of immediate annuity, you purchase the plan by paying a lump sum amount and in return, you receive a monthly pension for life starting from the immediately succeeding month. 

 

In the case of deferred annuity, you purchase the plan through a lump sum payment or via regular premium payments. However, you don't receive the pension immediately. Instead, you receive it only after a specified period of time has elapsed. Annuities are a great low-risk investment since they’re provided by life insurance providers and offer above-average returns along with a life cover. 

  • Municipal bonds  

As the name itself signifies, municipal bonds are nothing but debt instruments issued by an urban local municipal body. Municipalities issue bonds to investors to raise funds for development work. These bonds are heavily regulated by the Securities and Exchange Board of India (SEBI) and are often considered to be low-risk. 

 

The tenor for municipal bonds is usually around 3 years, with the interest rates being nearabout the prevailing market rates. With these bonds, you can choose to receive the interest on your investment periodically or receive it on maturity along with your principal amount. This makes them one of the best high-return, low-risk investments that you can currently opt for. 

  • Certificate of Deposit   

Issued by participating banking institutions, Certificates of Deposit (CDs) are short-term money market instruments. The tenor of CDs starts as low as 7 days and can go up to a year. These instruments are issued in dematerialised (demat) form, which means you need to have an active demat account to invest in these instruments. 

 

Usually, a Certificate of Deposit is issued at a discount and is redeemed at face value, the difference being the return on investment. CDs are heavily regulated by the Reserve Bank of India (RBI) and so, carry very low risk. The minimum deposit amount is ₹5 Lakhs, and you can invest in as many CDs as you wish in multiples of ₹5 Lakhs. 

  • Treasury Bills   

Treasury Bills, also known as T-Bills, are low-risk, high-reward investments that are issued directly by the government of India. This effectively means that these money market instruments carry zero investment risk. Currently, T-Bills are issued in India in three different tenors: 

 

  • 91-day bills

  • 182-day bills

  • 364-day bills

 

These money market instruments are zero coupon securities, which means that they are issued at a discount and then redeemed at face value. The difference between the issue price and the maturity value is the return that you earn.  

Fixed Deposit Investments in India

As the cost of living and lifestyle increases along with high market volatility, it is important to have some extremely safe, low-risk investments in your portfolio. One such investment that ticks all the right boxes is a fixed deposit.

 

To invest in an FD, you deposit a lump sum amount for a predetermined tenor with a bank or an NBFC. Over the investment tenor, the deposit continues to earn interest at the rate decided by the entity. 

 

Once the bank or the NBFC locks your investment at a certain interest rate, this rate does not change until maturity. You can decide how often you want to earn the interest (monthly, quarterly, semi-annually or annually), or you can choose to get it all together at the end. The constant rate of interest is unaffected by market fluctuations, so you can know exactly what your returns will be. The maturity amount promised to you at the time of investment is exactly what you get. 

 

Compared to a lot of other low-risk instruments, FDs offer a much higher rate of interest and hence, higher returns. This is precisely why they are considered to be a good high-return, low-risk investment option. 



With this, you must now be aware of the most popular high-return, low-risk investment options available in the country. That said, before you go ahead with your investment, it is advisable to first ensure that its risk and return generating potential matches your investor profile and your financial requirements. 

FAQs

  • ✔️What are the advantages of investing in a fixed deposit?

    FDs provide high returns even with low investments at low risk. They are the best first investment for any Indian with the fixed tenure, maturity amount, and other features.

  • ✔️Why invest in a Bajaj Finance FD?

    A Bajaj Finance FD offers the following benefits:

    1. Upto 7.45% interest rate

    2. Higher interest rates for senior citizens

    3. FDs for NRIs

    4. Systematic Deposit Plan

    5. High stability and credibility

    6. Flexible tenor

    7. FD calculator

    8. Fully online process

    9. Online loan against FD

    10. Minimum deposit of Rs 15,000