8 Low-Risk Investment Plans for Safe and Steady Growth

When it comes to managing personal finances, you may not be comfortable with the highs and lows of market-linked investments. Low-risk investment options may be ideal is your goal is preserving your hard-earned money while ensuring slow but steady growth. 

When exploring the key low-risk investments and safe options available in India, it’s important to understand their features and suitability. The insights will help you to understand how they align with your financial goals, such as the safety of capital, tax planning, and long-term stability.

As the name suggests, low-risk investments carry minimal or no risk. They usually offer stable, often guaranteed, returns. 

The Government or reputed financial institutions typically back these investments and structure them to minimise exposure to market volatility. These can be suitable for you if you prefer safety over high gains. 

Key Characteristics

• Predictable Returns: Usually fixed or defined in advance

• Capital Safety: Low or negligible risk of principal loss

• Liquidity Varies: Some may have lock-in periods

Lower Returns Compared to Equity: They are stable but provide lower returns than market-linked securities

Some of the popular assured-earning investment options are Fixed Deposits, the Public Provident Fund (PPF), and the Sukanya Samriddhi Yojana. Check out these and other options below: 

1. Fixed Deposits (FDs)

FDs are one of the most widely used low-risk investment options in India, offered by banks and other financial companies.

Features

• Tenure: 7 days to 10 years

• Interest Rate: 6.5% to 9% p.a. (varies by institution and changes as per issuer policies)

• Taxation: Interest is taxable; tax-saving FDs qualify for exemptions of the invested amount under Section 80C

• Liquidity: Premature withdrawal allowed with a penalty

• Insurance: Deposits offered by banks are insured up to ₹5 Lakhs by the Deposit Insurance and Credit Guarantee Corporation (DICGC)

• Suitable for: Investors looking for predictable interest over a fixed term

2. Public Provident Fund (PPF)

A small saving government-backed scheme that can provide long-term savings. It is ideal for building a retirement corpus.

Features

• Tenure: 15 years (extendable in blocks of 5 years)

• Interest Rate: 7.1% p.a. (compounded annually and rates change as per government policy)

• Taxation: Exempt-Exempt-Exempt (EEE) under Section 80C

• Liquidity: Partial withdrawal allowed from 5th year onwards

• Safety: Fully government-backed

• Suitable for: Conservative long-term savers seeking tax efficiency and guaranteed returns

3. National Savings Certificate (NSC)

This fixed-income investment scheme is popular among conservative investors. You can open an account at any post office. 

Features

• Tenure: 5 years

• Interest Rate: 7.7% p.a. (compounded annually)

• Taxation: Interest is taxable; investment qualifies for deduction under Section 80C

• Liquidity: No premature withdrawal except on specific grounds

• Suitable for: Small to mid-income investors focused on tax-saving and low-risk returns

4. Senior Citizens Savings Scheme (SCSS)

The Government introduced this scheme in 2004 to ensure steady post-retirement income for senior citizens.

Features

• Tenure: 5 years (extendable by 3 years)

• Interest Rate: 8.2% p.a., payable quarterly

• Taxation: Interest taxable; investment qualifies for deduction under Section 80C

• Liquidity: Premature exit allowed after 1 year with penalty

• Suitable for: Retirees seeking a reliable and safe income stream

5. Post Office Monthly Income Scheme (POMIS)

A Government-backed, low-risk savings scheme that provides a steady monthly income. Managed under the Ministry of Finance, it is a reliable investment option.

Features

• Tenure: Up to 5 years

• Interest Rate: 7.4% p.a., payable monthly

• Investment Limit: ₹9 lakh (single), ₹15 lakh (joint)

• Taxation: Interest taxable

• Liquidity: Premature closure allowed with penalty

• Suitable for: Investors wanting monthly income without risk to capital

6. RBI Floating Rate Saving Bonds 

The Reserve Bank of India issues bonds for the Indian government to raise funds for its projects. These include Government of India Savings (Taxable) Bonds. Any Indian citizen can buy them. 

Features

• Tenure: 7 years

• Interest Rate: 8.05% (linked to NSC rate + 35 bps, resets every 6 months)

• Taxation: Interest is fully taxable

• Liquidity: Cannot be traded or transferred; early exit for senior citizens only

• Suitable for: Investors seeking inflation-linked returns with sovereign safety

7. Sukanya Samriddhi Yojana (SSY)

The Government launched the Sukanya Samriddhi Yojana to support a girl child's higher education and marriage. It helps parents or legal guardians plan financially for their daughter’s future needs.

Features

• Tenure: Until the child turns 21 or marries after 18

• Interest Rate: 8.2% p.a. (compounded annually)

• Taxation: EEE status under Section 80C

• Liquidity: Partial withdrawal is allowed after the age of 18

• Suitable for: Parents saving towards long-term goals for their daughter

8. Debt Mutual Funds (Short-Term & Liquid Funds)

These are mutual funds that generate returns by lending to the Government and private companies.

Features

• Tenure: Flexible

• Expected Returns: 4%–8% or more p.a.

• Taxation: Capital gains taxable as per slab rate

• Liquidity: High for liquid funds (1–3 days redemption)

• Suitable for: Investors looking for a balance between return and safety

9. Recurring Deposits (RDs)

These deposits allow you to make regular monthly contributions to build a corpus safely.

Features

• Tenure: 6 months to 10 years

• Interest Rate: 3% to 8.5% p.a. (varies by institution)

• Taxation: Interest taxable

• Liquidity: Premature withdrawal allowed with penalty; partial withdrawal is not allowed 

• Suitable for: Salaried individuals aiming to develop disciplined savings

Tax on interest, tax benefits on the initial investment, and liquidity are three key factors to look out for before choosing an investment. Here’s an overview: 

Carefully consider several factors to ensure that these options align with your financial goals and circumstances. To choose the right investment plan, consider the following:

• Financial Goals

Identify your goals, like buying a house, funding education, or retirement. Pick an investment plan that aligns with them.

• Performance

Review past performance and compare it with alternatives. For mutual funds, check returns against benchmarks.

• Lock-in Period

Understand how long your money will be tied up. For example, you can prematurely close your POMIS account, but you may have to pay a penalty. Consider these factors against your need for liquidity. 

• Investment Costs

Check expenses like exit loads, brokerage, or management fees, which can reduce your returns.

Low-risk investments suit certain situations and investor profiles. They are particularly ideal if you prioritise the safe investment options of your capital and prefer predictable and stable returns. Here's who should consider low-risk investments:

• New investors seeking a risk-free start

• Retired individuals requiring predictable income

• Parents planning for their children’s future expenses

• Salaried professionals targeting steady savings for mid-term goals

• Conservative savers focused on capital safety
  

By understanding the nature, features, and taxation of each investment, investors can create a portfolio that aligns with their financial goals while minimising risk exposure. A well-balanced mix of low-risk options can provide the foundation for a financially secure future.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.