Safest Investment Options in India

Investments come with inherent risks, so it is crucial to gauge risk factors associated with various money investment options. This not only helps assess your risk tolerance but also helps you make wise financial decisions. 

 

Usually, investment options with higher risks offer better returns. However, you may not always feel comfortable with higher risks and may choose to park your funds in the safest investment options. This way, you get secured returns without taking any risk of losing out on your hard-earned money.

There are several safe investment options available in the Indian market. Choosing an investment that is right for you can make it confusing. 

 

To help you with this, here’s a list of some of the safest investment options and their features to help you make effective comparisons. So, if you're wondering which is the safest option to invest money in the Indian market, here lies the answer!

1. Fixed Deposits

Bank and NBFC FDs are one of the most preferred safe investment options in Indian households, and for a good reason. This is because FDs come with little to no risk and offer guaranteed returns. Calculate the return on your investment on various tenors using a FD maturity calculator to help you make the right decision.

 

FDs are considered extremely safe as they guarantee the safety of capital and returns. They are not subject to market-linked risks and are stable; and hence, one of the safest investment options. With FDs, you can choose between regular interest payouts or a lump sum payout at maturity, depending on your financial requirements.

2. Public Provident Funds

Public Provident Fund or PPF is among the safest options to invest money in India. It is backed by the Government of India, making it one of the most trustworthy and risk-free investment options available for Indian investors. 

 

This long-term investment option helps investors build a retirement corpus while offering incredible tax advantages. In addition, PPF is not market-linked, so the returns are guaranteed. 

3. Capital Guarantee Plan (ULIP)

A Capital Guarantee Plan is essentially a ULIP plan oriented towards protecting the investors’ money during an economic downturn. This serves as both an investment and insurance plan. 

 

According to the plan, a large proportion of your corpus is invested into debt and other instruments, thereby offering capital protection. The remaining part is invested in equities. This diversification of funds provides both safety and growth. 

 

With a policy tenor of 10 years, you have plenty of time to combat the volatility that comes with investing in equities. 

4. Mutual Funds

Mutual funds can be thought of as a basket that consists of shares or portions of shares of different companies. There are many mutual funds you can choose from, depending on your financial goals. 

 

A mutual fund is considered to be safer than equities as it is diversified and professionally managed. Additionally, large-cap mutual funds are relatively safe investment options as they are high-quality investments which have been performing well. 

 

Mutual funds may be ideal for you if you’re thinking about good investment options generating good returns. 

5. Savings accounts

A savings account can provide moderate returns on your money, and you can open one in any bank. However, while the interest earned on a savings account is minimal, it varies across banks. So, compare the interest rates of different banks to gain a better interest income.

 

This is also the safest option to invest money as it falls under the RBI’s insurance policy. As per the policy, you are insured up to ₹5 Lakhs for the interest and principal amount in case of a bank’s licence cancellation. 

 

6. Short-term certificates of deposit

The bank certificates of deposit, or CDs, are hardly subject to any loss unless you withdraw the money early. Plus, it would be wise to hold short-term CDs and reinvest, considering the prevailing hike in interest rates in India. 

 

All you have to do is invest for a short duration and then reinvest them back when there is a hike in interest rates. However, avoid locking your corpus in market-linked CDs for a significant period because of the risk factor.

 

Ideally, check and compare various CD rates before zeroing in on an option.

7. Money market funds

Money market funds are meant to distribute risk across investors' portfolios. These are nothing but pools of certificates of deposit, short-term bonds, and other low-risk assets. Brokerage businesses and mutual fund providers frequently sell them.

 

The money market fund, in contrast to a CD, is flexible. This is so because you can withdraw your money whenever you want without incurring penalties.

8. Corporate Bonds

The term ‘Corporate Bonds’ refers to a kind of bond with moderate risk issued by big firms. On the other hand, high-yield bonds, sometimes called ‘junk bonds,’ are the lowest of the lot. 

 

As interest rates vary, a bond's market value may also change. Bond values increase when rates are low and decrease when rates are high. However, it is possible to lose your invested money when the firm fails to fulfil its obligation to pay the interest and principal as promised.

9. Dividend-Paying Stocks

Although these aren't as safe as cash, savings accounts, or government debt, stocks typically carry lower risk than volatile investments like options or futures. Moreover, as dividend stocks pay cash dividends, it helps reduce their volatility but does not eliminate it. 

 

These dividend-paying stocks are considered safer money investment options than high-growth equities.

10. National Pension Scheme

Managed by the Pension Fund Regulatory and Development Authority, the NPS consists of corporate bonds, fixed deposits, and liquid funds. You can choose from several NPS schemes according to your requirements. 

 

Note that each fund has a different interest rate. In addition, employees in various industries can sign up for the NPF, which offers tax benefits of up to ₹2 Lakhs annually. Plus, you have the option of managing your portfolio actively or automatically.

11. Gold

You can invest in gold by purchasing sovereign gold bonds and exchange-traded funds (ETFs). Gold investments offer a way to protect money against inflation. In addition, it serves as a hedge against stock market decline since gold price and stock markets have an inverse relationship. 

 

Also, gold's price level does not decline noticeably over time, providing you with capital protection.

12. Recurring Deposit (RD)

Recurring deposits are a substitute for fixed deposits and are one of the safest options to invest money in India. You have to invest a fixed amount regularly to maintain an RD. The RDs also offer better interest rates similar to FD and allow you to earn higher returns. 

 

You can also avail a loan against your recurring deposit. Long-term investment in an RD encourages financial discipline over time. You can begin your RD investment with a small amount too. And due to the investment's independence from the equity markets, you can expect assured returns over time.

13. Post Office Monthly Income Scheme (POMIS)

The Indian Postal Service manages the POMIS, one of the best investment options for senior citizens. It is a fixed-income monthly investment plan with reasonable yet assured returns and minimal risks. 

 

POMIS has a maturity period of 5 years. After a year, the money can be withdrawn at any time with a 1-2% of early withdrawal fee. After 5 years, you may reinvest the funds. Note that the returns are taxable despite the absence of TDS. 

 

You can have many POMIS accounts as they are simple and easy to process. Also, you can transfer your account across post offices in India free of cost. The rate of interest is updated every quarter by the Government of India, and the current prevailing rate is 7.1%.

14. Senior Citizen Savings Scheme (SCSS)

An investing vehicle designed exclusively for Indian residents over 60 is known as the Senior Citizen Savings Scheme. SCSS has a five-year maturity term with the option of an additional three years. However, deposits of up to ₹15 Lakhs are permitted in this account. 

 

Though premature withdrawal is allowed, a 1.5% penalty is attached to it. Know that tax deductions are available for deposits of up to ₹1.5 Lakhs annually. This is another safe investment option for senior citizens. The prevailing rate of interest for the SCSS is 8%.

15. Sukanya Samriddhi Yojana Scheme (SSY)

Young girls in India are the focus of the Sukanya Samriddhi Yojana Scheme, which aims to educate them so they can have a stable future. Sponsored by the Indian government, it is a good investment option specifically designed for girls. 

 

The main goal is to improve the lives of young girls from low-income households. As per the scheme, parents can book an account for their under-10-year-old daughters. Only Indian citizens and two females per household can invest in the scheme. Note that the girl's birth certificate is one of the most necessary documents.

 

The amount of deposits made yearly should be between ₹500 and ₹1.5 Lakhs, and they should be made over a 15-year period. Under Section 80C, both the yearly deposit and the returns are eligible for tax exemptions. The average SSY return rate is 7.6% annually.

Depending on your risk appetite, you can easily choose the safest option to invest money. Although low-risk investment options may be safe, there are two drawbacks to investing in such money investment options. 

 

Firstly, low-risk assets produce lower returns than riskier investments. Secondly, inflation can diminish the buying value of money kept in low-risk investments.

 

This is also why low-risk investment alternatives make up for short-term investments or a reserve for your emergency fund. Conversely, investments with more risk are better suited for long-term high returns.

If you’re wondering what the safest investment options are, here’s a comprehensive list to help you choose from some of the safest options to invest money.

Disclaimer: These figures are subject to change at the issuer’s discretion.

 

Investing is an essential part of every individual’s journey towards financial security. However, the risks associated with investing can make investing unattractive to many. Understanding your risk profile and analysing the risks associated with different investment options can help you make wise investment decisions.