6 Best Risk Free Investement Options in India

Dinesh Maheshwari September 4, 2019

Savings and investments are two vital pillars of an economic landscape. Risk-free investment options, therefore, have an important role to play to become financially independent. Though the term investment itself subsumes wide areas, this article will focus on risk-free investment options available in our financial systems.

1. Post Office Savings Schemes

The scheme offered by post office yields better return and high rate of interest when compared to the schemes offered by banks and other financial institutions. With their widespread presence, post offices provide a viable and easy available options for investing, offering a return that ranges from 6% to 10%, depending on the schemeThere are multiple investment options in this category, which cater to the different classification of people and their needs. Like Sukanya Samriddhi Account, Senior citizen saving scheme etc.

2. Public Provident Fund (PPF)

A maximum of Rs. 1.5 Lakhs per year total can be deposited in PF funds as a non-taxable amount, any excess amount will be taxable. The return interest rate for the entire month can be availed only if you deposit amount before 5th of the month. Usually, the interest rates for public provident fund ranges between 7% to 9 %.

3. Fixed Deposits (FD)

Fixed deposits are a very popular investment tool used by salaried and non-salaried individuals in order to save a particular lump sum of money for a certain time frame. It is totally risk-free and assures capital protection and offer a guaranteed return at the date of maturity.One can invest their money from one month to any number of years in the bank. The interest ranges from 6% to 8%, which is more than a savings account. Premature withdrawals is allowed; however, you may have to pay a penalty for withdrawing. You can also avail loans and credit cards against your fixed deposit.

3. Green Bonds

Green bonds were created to fund environmental projects, i.e. for business activities and projects that are environment-friendly in nature. The majority of the green bonds issued in the market are asset-linked bonds. The benefits from these bonds are used in the development of sustainable sources of energy and other environmental friendly projects. Usually, returns from the green bonds are similar to other conventional bonds in the market, i.e. around 7% to 8 %. But by investing in green bonds, investors are taking steps to address the long-term climate risks that could potentially affect their creditworthiness.

4. Risk-Free Mutual Funds

Although mutual fund investments are subject to market risks, they less risky as compared to investments options. These type of funds are invested towards debentures, government bonds, commercial papers, fixed securities. Mutual funds usually provide fixed yearly returns of approximately 10 -12%. You can invest in mutual funds through Systematic Investment Plans (SIPs).Mutual funds don’t have any maturity period; therefore your investment strategy will depend on your return goal. The investment could be for a short, mid or long-term depending on your end objectives.

5. Masala Bonds

These are bonds issued outside India, but denominated in Indian Rupees rather than the local currency. The issuer of masala bonds usually invest in infrastructure projects. Unlike dollar bonds in which the borrower takes the currency risk, in masala bond investors bears the risk. Masala bonds yield a return of 5% to 15%, making it an attractive investment opportunity. Also, capital gains from the increasing value of rupee against the dollar are exempted from the tax deduction.

Rather than keeping all your egg in a single basket, diversify your investments to hedge against losses. Additionally, comparative needs and requirements of a person or entity must to be taken into consideration when making an informed decision. With so many investment options available in the market, it’s better to deicide your investment plan and exit strategy before investing.

Dinesh Maheshwari

September 4, 2019

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