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Low Risk Investment Options That Offer Higher Returns

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In today's era, wisely investing money is important. As the cost of living rises, everyone wants their savings to grow.

But not everyone is comfortable taking big risks.

Many people want to invest in options that are safe and secure yet offer good returns. This is why low risk investments with high returns are highly sought after. They strike a balance between protecting one's money and growing it.

This article will introduce you to the top 7 low risk investment options that promise high returns. We'll also delve into their key features and benefits.

1.) Fixed Deposits

Fixed Deposits are one of the foremost low risk investment options in India. Essentially, a fixed deposit (FD) is a type of account where you deposit a sum of money for a predetermined period of time, and the bank pays you interest on that sum. They are popular because of their simplicity and safety.

Here are the notable features of fixed deposits -

  • Assured Rate of Return: Once you place your money in an FD, the interest rate is set. It won't change during the tenure, ensuring you get the promised return. Many banks even offer online calculators to estimate your earnings.
  • Tax Threshold for Interest: Until the interest from your FD exceeds the limit set by income tax guidelines, banks won't deduct tax. This can be a relief for smaller depositors.
  • Flexible Tenure: With FDs, you, as a user, decide the term. While each bank might have a minimum and maximum limit (like 7 days to 10 years), within that range, you can choose the duration based on your financial plans.
  • Easy Liquidation: If you need your money, breaking an FD is an easy process. If you've opened the FD online, you can even liquidate it via net banking. Otherwise, a short visit to your bank branch can get it done.
  • Loans Against Fixed Deposit: In times of sudden financial need, your FD can come to the rescue. Most banks allow you to borrow up to 95% of the deposit amount. It's quick and easy, making FDs a reliable investment.

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2.) National Savings Certificate

National Savings Certificate (NSC) is a savings bond initiated by the Indian Government. As one of the preferred low risk high return investments, these certificates are essentially a means to secure your funds while also availing tax advantages. They fall under the purview of the Indian Postal Service, which ensures their accessibility and reliability.

Here are the salient features of NSC -

  • Government-Backed: As NSC is offered by the Indian Government, they are considered a safe and trustworthy investment.
  • Tax Benefits: Investments in NSC qualify for tax deductions under Section 80C of the Income Tax Act, 1961. This means you can avail of tax exemption up to INR1.5 Lakh when you invest in NSC.
  • Flexible Denominations: One can start investing with as little as INR 100. Other denominations available for purchase include INR 500, INR 1,000, INR 5,000, and INR 10,000.
  • Choice of Tenure: Investors can select between two maturity periods for their NSC – 5 years or 10 years. This gives flexibility in terms of investment horizon.
  • Attractive Interest Rate: Offering an annual interest rate of 8%, NSC stands out as a potent combination of safety and growth.
  • Easy Accessibility: Given that they're available through the vast network of post offices across India, accessing and investing in NSCs is quite convenient for investors of all backgrounds.

3.) Public Provident Fund

Public Provident Fund (PPF) is a renowned long-term savings scheme that offers a blend of savings and tax benefits. Established in 1968 by the Ministry of Finance, PPF serves as a means to accumulate small savings by earning reasonable returns. As one of the dependable low risks investments, it has been the choice of numerous investors in India.

Here are the prominent features of PPF -

  • Tenure: PPF comes with a default tenure of 15 years. However, upon maturity, one can choose to extend it in blocks of 5 years.
  • Investment Limits: Investors can contribute a minimum of INR 500 to a maximum of INR 1.5 lakh annually. This can be done either as a one-time payment or in up to 12 instalments.
  • Deposit Frequency: It's essential to deposit into the PPF account at least once every year throughout the 15-year period.
  • Mode of Deposit: Contributions to the PPF can be made in various forms — cash, cheque, demand draft, or even online transfers.
  • Nomination: Account holders have the privilege to name a nominee, either during the account opening phase or anytime later.
  • Joint Accounts: PPF mandates that the account can only be in the name of an individual. Joint account options are not provided.
  • Partial Withdrawal: From the seventh financial year onwards, account holders can make partial withdrawals from their PPF.

4.) Mutual Fund Investment

Mutual Fund Investment refers to a collective investment vehicle that pools together money from various investors to invest in diversified assets like stocks, bonds, and other securities. 

Managed by professionals, mutual funds give individual investors access to portfolios of equities, bonds, and other securities, which might be difficult to create on one's own. It's one of the prominent low risk high return investments in India, depending on the type of fund chosen.

Key features of Mutual Fund Investment are as follows -

  • Diversification: Mutual funds invest in a wide array of securities. This diversification reduces the risk associated with a single security's poor performance.
  • Professional Management: Fund managers with extensive experience and resources handle the investment decisions.
  • Liquidity: Generally, investors can easily redeem their mutual fund units at the current fund's Net Asset Value (NAV) with minimal exit charges, if any.
  • Variety of Options: Mutual funds offer various categories like equity funds, debt funds, hybrid funds, and others, catering to the diverse risk appetites and investment goals of investors.
  • Affordability: With a relatively small amount of money, investors can buy units in a mutual fund and get exposure to a diverse portfolio, making it accessible to most.

5.) National Pension Scheme (NPS)

The National Pension Scheme (NPS) is a voluntary, long-term retirement savings scheme designed to provide systematic savings. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

Introduced to inculcate the habit of saving for retirement among the citizens, NPS has emerged as a favoured low risk high return investment in India for those looking to secure their post-retirement life.

Salient features of the National Pension Scheme include -

  • Flexible Investment: The minimum annual contribution for the NPS is INR 60,000 without any defined upper limit, allowing flexibility to the investor.
  • Diverse Returns: The returns on NPS are contingent on the allocation between equity and debt in the investment portfolio.
  • Tax Benefits: Investment in NPS allows a tax deduction of up to INR 50,000 under Section 80CCD (IB), over and above the INR 1.5 lakh deduction available under Section 80C of the Income Tax Act.
  • High Returns: Compared to several traditional investment avenues, NPS often yields higher returns, especially because a portion can be invested in equities.
  • Customisation: Investors have the liberty to choose their investment strategy, select their fund manager, and even opt for annuity plans according to their preferences and risk appetite.
  • Consistency: A notable feature of the NPS is that the account number, also known as the Permanent Retirement Account Number (PRAN), remains consistent even if there's a change in one's employment or other details.

6.) Gold Investment

Gold Investment in India carries a rich historical and cultural significance. Apart from being a cherished ornament, gold has always been viewed as a reliable store of value and a hedge against economic uncertainties.

As one of the classic low risk high return investments in India, gold serves both as a tangible asset and an instrument that can provide financial security during turbulent times.

Salient features of Gold Investment include -

  • Safe Haven: Gold is often considered a ‘safe haven’ asset. During periods of economic downturn, banking crises, or geopolitical tensions, its value tends to remain stable or even increase.
  • Inflation Hedge: Gold acts as a hedge against inflation. When the purchasing power of currencies diminishes, gold often retains its value, making it an attractive investment.
  • Unaffected by Market Trends: Unlike stocks and bonds, the value of gold is not directly influenced by the fluctuations and vagaries of the financial markets.
  • Consistent Demand: The demand for gold, both as an investment and as an ornamental asset, has seen a steady rise in India. This consistent demand contributes to its appreciating value over the years.
  • Impressive Returns: Historically, gold has offered substantial returns, with a reported 23.5% return on investment in recent years as per the data.
  • Liquidity: One of the key advantages of gold is its liquidity. It can be easily sold or pledged to secure immediate funds, making it a flexible asset to hold.

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7.) Insurance

Insurance, more than just a safety net for unforeseen circumstances, has evolved into a viable investment avenue.

Traditionally, insurance primarily focused on term plans that provide beneficiaries with death benefits. However, the modern insurance landscape has diversified, with companies introducing products that amalgamate investment benefits with conventional death benefits. These products cater to both long-term and short-term financial goals, enabling individuals to strategise their investments based on their preferences.

Importantly, while insurance offers potential returns, its core feature remains safeguarding individuals and their families from financial challenges arising from illnesses, accidents, and untimely death.

Salient features of Insurance include -

  • Dual Benefits: Modern insurance products offer both death benefits and investment returns, fulfilling requirements for both protection and financial growth.
  • Flexibility: With a myriad of insurance products available, individuals can choose between long-term and short-term investment plans based on their requirements.
  • Risk Mitigation: Insurance acts as a shield against uncertainties, ensuring financial security in cases of unexpected events like accidents or critical illnesses.
  • Tax Benefits: Premiums paid towards insurance policies often qualify for tax deductions, making them an attractive investment option from a taxation perspective.
  • Liquidity: Certain insurance plans, like money-back policies, offer periodic payouts and ensure liquidity for the policyholder.
  • Peace of Mind: Beyond the financial aspects, insurance provides peace of mind. This is because with an insurance plan, one can know that their family will have financial support in their absence.

Summing it Up

In 2023, individuals are continually seeking avenues to grow their wealth without exposing themselves to high risks. This article has provided a comprehensive overview of the top 7 low risk high return investments in India that cater to such objectives.

From the timeless reliability of Fixed Deposits and Gold Investment to the modern dynamics of Mutual Funds and Insurance products, each option offers its unique blend of security and growth potential.

Whether it's the government-backed assurance of National Savings Certificate and Public Provident Fund or the forward-thinking structure of the National Pension Scheme, investors have been given many choices.

With that said, it's crucial to align choices with personal financial goals and risk appetite. Ultimately, the goal is not just to accumulate wealth but to ensure financial stability and security for oneself and one's loved ones in the future.

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