Over the past few days I’ve received a few comments whose central theme is safety of returns while providing moderate returns.
I think the bad performance of the stock market over the past few years has made people search for instruments where return of capital is more important than return on capital, and these questions are a result of that mindset.
In this post I’ll be listing out 10 instruments that I think are quite safe for investing along with their tenure, expected return, tax applicability and other notes. If you think something else should be on this list, please leave a comment.
| S.No. | Investment | Tenure | Expected Return | Tax Applicability | Comments |
| 1 | Bank Fixed Deposits | Few days to several years | Usually over 8% | Taxable at the investor’s slab | Bank failures are rare in India so bank fixed deposits are a very safe way to invest your money.You know the rates up front so there is no uncertainty there.Taxes can eat into your returns though, especially if you are in the high tax bracket, but even then a FD that compounds quarterly and is done for a long maturity will yield well.Here is a link to a post which has the list of some of the best bank fixed deposits that are available in India right now. |
| Â 2 | Tax Saver Bank Fixed Deposits | 5 years or more | Â Usually over 8.5% | The amount that you invest in tax saver FD is deductible from your taxable income up to a limit of Rs. 1 lakh under 80C. The interest income itself is taxable. | Like the bank fixed deposit, this is also a very safe and certain investment.The drawback is that money is locked in for at least 5 years, and the positive is that you get some tax benefit to juice up your return.Here is a link to some of the best tax saver fixed deposits available in India right now. |
| Â 3 | Public Provident Fund | Â 15 years | 8.8% | The amount you invest is eligible for 80C deductions and the returns are tax free too. | This is also a very safe investment, and the returns are spectacular, specially for someone in the 30% tax bracket.If you don’t mind the 15 year wait period then no other fixed income investment can match the PPF return for the safety it offers. |
| Â 4 | NSC IX Issue | Â 10 years | 8.9% | Interest income is taxable. | This is another safe investment with decent returns.Here is a post with this and other post office scheme details. |
| 5 | Senior Citizens Savings Scheme | Â 5 years | 9.3% | Interest is taxable, investment amount is eligible for 80C deduction. | A lot of readers have commented here over the years about how useful the SCSS is along with the monthly income scheme of the post office for their parents, and relatives and this is a good option as well.Here is a link to an image that has the interest rates for this and comparison with other similar instruments. |
| Â 6 | Monthly Income Scheme | 5 years | 8.5% | Interest income is taxable | This is useful if you are looking for an instrument that gives you a monthly income.Here is link to a post about MIS. |
|  7 | Tax Free Bonds | They trade on the stock exchange so you can buy or sell any time. | Usually upwards of 8% | Income is tax free | I would say that these bonds aren’t as safe as a bank deposit or a post office deposit but they can still be categorized as fairly secure instruments.If you buy these bonds from the stock market right now, they are trading at higher than their face value so your effective yield will be less but then there is always a chance to make capital gains if interest rates come down.Here is a good link on the NSE website that has quotes of all these bonds. |
| Â 8 | Fixed Maturity Plans | 1 year or more | Not fixed but usually comparable to fixed deposits | This is tax efficient when compared with FDs. Read more for details. | Although these are fixed income instruments, there is absolutely no guarantee or indication of what the returns will be like.To that extent, they are very different from the other instruments mentioned in this list.Even then, they are specially attractive to people in the higher tax bracket due to their eventual FD like returns and tax advantage.Read more about FMPs here. |
| 9 | Debt mutual funds | Varying maturities and can be bought and sold anytime. | Not fixed. | Tax on capital gains and dividends. | These are like FMPs in the sense that the returns are not fixed, so they are not meant for you if you can’t handle the uncertainty.Their popularity stems from the fact that they are flexible to buy and sell and have given decent returns in the past. |
| 10 |  Corporate NCDs | Varying maturities |  Higher than fixed deposits. | Interest is charged according to your slab and capital gains are also applicable. | These are higher risk compared with the other instruments mentioned in this list, especially if you invest in a NCD of a company which doesn’t have robust finances.The higher risk means that their return is higher as well and they can be used to juice up your fixed income portfolio but you need to be careful while buying them.This post about 6 things to keep in mind while investing in company NCDs is a good way to get started on this topic. |
| 11 | Savings Account | No Maturity | 4 – 7% | Interest is tax free up to Rs. 10,000 and then charged according to your slab. | A reasonable place to keep your short term funds, but if you have a lot of money in a savings account then you need to consider a FD or some other instrument that can yield higher. |
All these options are widely known and based on what you want to do and what the rest of your portfolio looks like, you can pick and choose one or more for safety and reasonable returns.
Finally, would you like to add anything to this list?
Update: Added Savings Account per Ankur’s suggestion, please excuse the inaccurate title.
Can u suggest a few leveraged ETFs in India.
Does anybody know how many, if any, bond issuing companies have gone bust in last 20 yrs. That would be a reality check if such a thing is really to be expected.
Dear Alam, please deposit in FD account….
Sir,
I am an employee earning 3 to 3.5lakhs. per annum.I have a daughter of 3years old.I have a saving of Rs 4lakhs.
I want your kind suggestion to secure my child’s future alongwith mine with this amount of limited funds.Awaiting fot your kind response.
one more thing, those investment options should benefit in Income Tax deduction.
Thank You,
Hi Makarand,
I think Equity Linked Saving Schemes (ELSS) is the best investment to have an exposure to the markets and get income tax deduction at the same time. It is better to start an SIP of Rs. 10K-12K in ELSS and rest you can invest in open-ended equity schemes.
Hi Manshu & Shiv,
First of all thanks to both of you for sharing valuable info on investments and for your guidance.
I need your valuable guidance for below:-
I want to start investing in market and searching for a way to begin with. At this initial stage i can invest Rs. 20k to 25k PM. So please guide me for same.
Thank You,
Makarand
Hey,
I have just started my career. I have very less income. I am thinking of investing my money. Which would be more preferable and more profitable- investing in SIP or RD?
If I invest in SIP, is there a possibility of incurring loss in any case?
Please do clarify on this ASAP. It would be very helpful.
Thank you in advance. 🙂
Hi Prameeth,
SIP in equity mutual funds carry potential of generating higher returns as compared to fixed deposits or recurring deposits. So, one should go for equity SIPs in order to earn higher returns.
Also, as their returns depend on equity market returns, risk of loss is also there in the short to medium term. But, in the long term, as the stock markets ultimately move up, you should end up earning handsome returns.
Hey!!
Well.. I barely know about investment schemes but the person I want to marry need to earn money, for my parents to agree upon our relationship.
Currently me and my boyfriend are pursuing Bachelor of Engineering from a government college, final year.
We both are average in studies.
He is better at communication skills used in marketing than technical, so he has started a part time job at Arena Animation with just 72000 p.a. from this week.
I belong to an upper middle class family and he belongs to a middle one.
So he needs to buck up his socks for marriage which hopefully occurs after about 4 years or so.
See I know that I am asking an immature question but I liked your compilation and replies.
Please suggest me something by which we can put each penny at the right place from now , so that we can have a safe future. Is putting some part of money in a savings account each month enough? Or there are other better ways?
Thanking you,
Best regards.
Hi Sagarika,
Your savings account will earn 4% for you in a year, so even if you keep the whole of Rs. 6,000 per month in a savings account, you’ll end up adding hardly anything to your money.
Rather you should invest this amount either in a recurring deposit to earn safe 8-9% returns or route the same into stock markets through equity mutual funds to earn higher returns.
I would rather advise you to go for a balanced fund which invests in a mix of equity & debt. If the current Modi government is able to change the fortunes of India’s economic & fiscal condition, then I think you would end up earning some handsome returns on your investments and convince your parents about your relationship and marriage.
hi,
I M blessed with a son recently.
I want to deposite 1 lac lumpsum for 15 year
which is the best possible means of good return.
Hi Manas,
Equity is the best long term investment. You should invest this amount in 3-4 well performing diversified equity mutual funds.
nice article shiv 🙂
i appreciate the efforts put in by you in spreading the financial knowledge
request you to extend this particular article by suggesting a list of investment options age-wise
Hi Kiran,
This article is contributed by Manshu, so you should thank him instead. 🙂
Hi sir
Could u please confirm me that my investment in a chandigarh based company rich infra india ltd is safe or not.they are taking money on the name of plot sale in unknown place as fixed deposit and recurring deposit like sahara.and giving gurantee of 16% per annum return.
Regard’s
Hello
I have a question on PPF.
Back ground:
My father-in-law has opened a PPF account for my daughter and my wife as guardian in Post Office in 2006. While opening the PPF account he has mentioned my daughter’s name as D. XXXXX and my wife name as D.XXXX.
Now, I wanted to transfer the PPF to ICICI bank. Both my wife (SB Account) and my daughter (Kids SB account) has savings bank accounts with Full Names, ie., My wife’s name as Surname Lastname and my daughter’s name as Surname Middlename Fullname.
As far as I know while transferring, Post Office will send the cheque to ICICI with the balance amount and because of the name difference, Will there be any problems while transferring?
If it is a problem for transfer, Is there any other way to fix this issue? (like can I change both the names at Post office first then transfer?)
Your answers are greatly appreciated.
Thanks in advance
Srini
Nice figure out investment plans
I want to save some amount from my salary every month and invest it.
Could you please suggest, should I invest in SIP or Recurring Deposite?
Thanks.
It’s secure to invest money in the Bank. But My question is that when there are lots of sources are available to make money online. So this are secure?
No most of the sources available to make money online are scams and you should be very careful with them.
Can you please let me know what are the sources of making money on line?
Trying to explore –
I have a flat worth around 60 L today. I wanted to know should I retain it, as there would not be much appreciation on this now; or else sell the same, and invest the money else where (as a safe investment). I wish to park this money & see it grow for the next 10 yrs.
kindly suggest options..
[email protected]
This is a difficult question and I don’t know if I can answer it for you, real estate has been going good for the past decade or so and will perhaps continue to do well in the near future as well. If you take money out of there you will have to pay taxes and also there aren’t many safe investments that can beat inflation.
sir my query is suppose I invest 10,000/- in reliance liquid fund -cash plan-growth for a week how much gross amount I will receive after seven days i.e. 10,000+
After a week you won’t get that much more and I’m not sure what the question here is because there isn’t any investment that can offer you much in just 7 days.
Hi Manshu… I think what Mr. Arvind wants to ask is about the safety of liquid funds. If he invests in a liquid fund, I think he wants to know whether he’ll surely get more than his investment of Rs. 10,000 or if the value could even fall below Rs. 10,000.
If my interpretation of your query is right Mr. Arvind, I want to tell you that generally liquid funds never give negative returns and they have very very rarely given negative returns in the past (only on a very few occasions) and that too, very small negative returns due to some panic situations.
Reliance liquid fund generated 0.16% last week, so, had you invested in it, your investment could have grown to Rs. 10016 in one week.
NHB Suvrridhi FD-100% owned by RBI
Int Rate 9.25%(9.85%0 for seniors)
80 C benefits Rs 1 Lakh
5 Years lock in
very nice details. You know i am searching it and got best info from ur article. thanks a lot.
Hi,
Apologies for posting so late, but i came across this link just now. I received 1.5lakh from mutual fund investments and I want to invest it (by dividing the amount into parts) to gain maximum returns. Can you suggest something?
thanks