Investment serves as an additional source of income or assists in resolving a financial crisis. It also helps financially in your after-retirement life. Primarily, investment improves your economic condition by assisting you in achieving your financial objectives. It motivates you to purchase things of your requirements as your purchasing capacity increases as time progresses. If by any means you get any sudden income, either as a bonus or in the form of an arrear from your company, or you get any share from your ancestral property, which you can sell and receive a sum of money. It is a smart choice to invest that money to earn for you. A financial opportunity of making an investment option enables you to increase your wealth gradually. Financial institutions offer a variety of investment plans, each with unique risks and potential returns. The best investment option for you depends upon your personal financial objectives, capacity to accept risk, and investment duration. Investment allows you to set aside money for the future and reach your financial objectives. But, as you know, there are many investment options available. So, it is quite difficult to select the right investment option. In fact, selection of ideal investment depends mainly on your willingness to accept risk and your return expectations. You should be very careful when opting for investment because it should help you in balancing both risk and returns.
What is a Low-Risk Investment?
A Low-Risk investment means a lesser need to tolerate the risk of loss or return. In low risk investment the investor prefers minimal to no fluctuations in their investment portfolio. Generally, retired people and those who have invested years in accumulating savings opt to make these investments. The profits from these investments are consistently assured since they depend on fixed-income assets. Here are some top Low-Risk Investment options that involve minimum risk:
- Fixed Deposit: Fixed deposits are known as one of the safest types of investment. You can earn substantial profits from these fixed deposit plans, but these profits are guaranteed. The main positive point of a fixed deposit plan is that it is a low-risk investment and ensures security and guarantee of returns, and the returns are unaffected by market volatility. The main feature of a fixed deposit is that the principal remains unchanged.
- National Savings Certificate: The National Savings Certificates are issued by the Indian Government. These Certificates give tax benefits under section 80C of the Income Tax Act, 1961. The Indian Postal Service issues the National Savings Certificates on behalf of the Indian government. You can buy these certificates at any post office across India. Investment in NSC can be initiated with a minimum of Rs. 100. The different amounts for which the certificate can be purchased are Rs. 10,000, Rs. 5,000, Rs. 1,000, Rs. 500, and Rs. 100. NSC provides two maturity options: one is for 5 years and the other is for 10 years. It gives the annual interest at the rate of 8%. NSC stands out as one of the top investment options as it provides significant returns with low risk. Additionally, individuals can get a benefit of tax exemption up to Rs 1.5 lakh, as permitted under section 80C of the Income Tax Act.
- Public Provident Fund (PPF): A Public Provident Fund is a government-supported investment scheme which serves as a low-risk investment option. It provides a good return without risk; that’s why it is also considered one of the top investment options. This investment option is a very common investment option. It provides both savings and tax benefits. There is a lock-in period for the PPF account, and you can only withdraw the entire amount once the maturity period completes. The interest which you earn on this plan is updated and disbursed by the government on a quarterly basis.
- Mutual Funds: Mutual funds are funds which are meant for short-term investment. Mutual funds are a good choice for newcomers to investing who seek low-risk options for a short duration. The main feature of these mutual funds is that this is a low-risk investment in the money market. In this investment option, investors put their money into the money market and the money market mutual funds provide favourable returns. A money market fund generally has an average maturity of one year.
- Annuities: Annuities are very safe investment options. In this option, you receive a consistent, fixed income in return for an initial investment which is guaranteed either for a designated time or for a lifetime. The returns are supported by the insurance firm providing the annuity. The money invested in an annuity is typically tied up or traded for the stream of upcoming cash flows. Consequently, they remain illiquid. Undoubtedly, annuities are the most appropriate for older adults seeking a reliable, guaranteed source of income, specially for after retirement life.
- Municipal Bond: A Municipal Bond, also known as a Muni-Bond, is a financial instrument which is issued by municipal corporations of India. These local government bodies use the money, which they collect from these bonds, to fund government projects for socio-economic growth of the country, such as constructing bridges, schools, hospitals, and providing essential services to households, among others. These bonds have a maturity period of three years and during this period, municipal corporations offer returns based on either property and professional tax collected or revenue generated from that specific project.
- Term Deposit Certificate: A Term Deposit is a fixed-term deposit Certificate which is provided by scheduled commercial banks which cannot be withdrawn before the maturity date. Cash certificates are a form of deposit bought for a specific amount of money. The account holder buys the cash certificate for a specific amount but is required to make payments toward this amount only during the duration of the certificate. Generally, the account owner accumulates the complete amount of the certificate, gaining interest as funds are deposited into the account, similar to an inverted loan. Account holders process payments once every three months. Cash certificates can endure for years, and holders may also obtain loans against them if needed.
- Treasury Bonds: The Government of India issues Treasury Bonds to obtain funds for a duration of up to 365 days. The Treasury Bond is basically an agreement between the issuer and the investor, in which the issuer assures interest returns on the face value of bonds held by investors, along with the repayment of the principal amount on a specified date. They are viewed as highly secured and low-risk investments because the government issues these bonds. But because of low risk, it gives decreased risks. Consequently, the returns on Treasury Bills are not as high as those on other money market instruments.
- Life Insurance with Cash Value: Life Insurance and cash value are merged for the coverage of life insurance with the advantage of a savings feature. The risk level is typically low in this investment option since it ensures beneficiaries receive a pay-out when the policyholder dies. It also increases the cash value at a predetermined interest rate and without any risk of loss. This option also provides usually tax-exemption. Here in this option, The profit rate is more advantageous than conventional savings methods, although it generally provides smaller returns than more heavy investment options.
- Investment in gold: In India, investing in gold is viewed as the wisest choice for short-term investment. The investment in gold can prove useful for any duration, providing protection and stability amid banking crises, inflation, or social disturbance. One more advantage of investing in gold is that fluctuations in the financial market do not impact gold’s value. The demand for gold has consistently risen, leading to a 23.5% return on investment over the last few years.
Bottom line.
A person can achieve a favourable return on investment if the funds are allocated properly and in the appropriate fields. By selecting a secure investment choice, the individual can protect themselves from market fluctuations and effectively reach their financial goals in life.
FAQ`S
The examples of secure investments include fixed deposits, PPF, NSC, and others. But it is important to understand that the risks and returns associated with investment can fluctuate over time.
If you are an investor and prefer to avoid risks, you should explore investment options with relatively low risks. For example, a fixed deposit can be the best choice if your risk tolerance capacity is very low.
