If you are like most risk-averse investors, you want to accrue sky-high returns on investments without the potential risk of losing your hard-earned money. However, it is a common notion that safe investments with little or no risk involved won’t earn you good returns. Put your concerns to rest, as this is not true!
Numerous risk-free investment avenues promise good returns. The trick is in finding an investment option best suited for your financial goals. So, let us have a look at 5 risk-free investment schemes.
1. Fixed Deposits
Fixed Deposits or FDs are a popular way to safely keep excess funds and multiply your savings steadily. Opening a fixed deposit is simple; you lock away a sum for a specific period. Here, the lump sum you put aside earns interest.
A Fixed Deposit gives a guaranteed return. You can choose to invest in a cumulative or non-cumulative FD.
When your funds collect interest in cumulative deposits, the amount is added to the principal sum and is reinvested. This leads to accrual growth of interest. At the maturity of your FD, you get the principal amount invested along with the earned interest income into your account.
Contrarily, in non-cumulative deposits, the interest earned is disbursed at regular intervals – annually, quarterly, or monthly.
2. Recurring Deposits
Another preferred risk-free investment avenue is a recurring deposit or RD. Here, you invest a fixed amount periodically, and the funds earn interest at competitive rates ranging from 4% to 8%.
Besides, you don’t need a large sum to start your investment, and you can opt for automatic monthly deductions using fund transfer or online banking features. Since the financial instrument is not linked to the equity market, you collect assured returns when your deposit matures.
3. Public Provident Fund
Public Provident Fund or PPF is an excellent option for earning attractive interest at 7%-9% on your savings. These deposits are perfect for long-term wealth creation and help you build a retirement corpus. You can invest any amount from Rs. 500 to Rs. 1.5 lakhs annually to start your investment.
Besides, with an extended tenure of 15 years, the PPF provides huge compounded tax-free returns. Since the fund is government-backed and does not depend on market volatility, it is safe and entirely risk-free.
4. National Pension System (NPS)
If you are planning for your retirement early, the National Pension System or NPS is an excellent investment scheme. It is a lucrative long-term saving avenue offering safe and regulated market-based returns. When the investment matures, you receive a corpus along with a regular pension in your retirement years.
NPS is a mix of various financial instruments such as stocks, fixed deposits, liquid funds, and corporate bonds. The scheme possesses an in-built risk reduction strategy that shields your retirement corpus from share market volatility. So, as you near your retirement, the risk reduces automatically.
Here, you select an equity-debt mix for your investment initially. As you cross 35, a part of your investment moves into an FD-like instrument from stocks every year. Close to maturity, your retirement corpus is in risk-free instruments, and your equity exposure remains limited.
5. Sovereign Gold Bonds (SGBs)
Sovereign Gold Bonds are RBI mandated gold bonds issued against grams of gold. This investment instrument is an excellent alternative to investing in physical gold. Since gold prices are less susceptible to market fluctuations, SGBs are secure.
Returns on SGBs are superior as the price of gold appreciates over time. Besides, gold has the potential to hold its value even during stock market turmoil. The investment corpus on GSBs grows manifold and acts as an effective hedge against inflation.
Conclusion
The risk-free investment avenues are perfect for preserving your capital and growing it steadily. So, compare the features of the investments mentioned above and pick the ones that suit your investment goals and financial vision.
