Exploring low-risk investment options for Indian beginners
What's the story
One of the biggest fears beginners have when it comes to investing is the fear of losing money.
However, there are plenty of low-risk investment options available in the Indian financial market that are perfect for beginners.
These options not only protect your capital but also offer a reasonable return over time.
Getting to know them is the first step to start building a strong investment portfolio.
Savings
Savings account: A safe start
A savings account is the most fundamental investment and a great place to start for beginners.
Most banks in India provide interest rates ranging from three percent to four percent on savings accounts.
The primary benefit is the high liquidity it provides, permitting investors to withdraw funds at any time without penalty.
This is why it is an ideal option for keeping your emergency funds.
FDS
Fixed deposits: Guaranteed returns
Fixed Deposits (FDs) are among the most favored low-risk investment instruments in India.
By opting for FDs, you can invest a lump sum amount for a fixed tenure at a predetermined interest rate, typically ranging from five% to seven%.
This rate is higher than savings accounts and remains assured until maturity, rendering FDs a safe option for conservative investors.
RDS
Recurring Deposits: Discipline in saving
Recurring Deposits (RDs) promote disciplined saving habits by mandating investors to deposit a predetermined sum every month into their RD account.
They offer interest rates comparable to Fixed Deposits, although the rates differ across banks.
RDs are ideal for individuals aiming to accumulate funds systematically over time without exposing themselves to significant risks.
PPF
Public Provident Fund: Long-term growth
The Public Provident Fund (PPF) is a government-backed long-term investment option that offers tax-free returns, currently at around 7% to 8%.
By requiring a minimum annual investment of only ₹500 and capping it at ₹1,50,000, PPF provides flexibility while fostering a habit of disciplined saving with its lock-in period of 15 years.
Debt funds
Debt mutual funds: Diversified low risk
Debt mutual funds invest in fixed-income securities such as government bonds, corporate bonds, and Treasury bills.
They provide higher returns than savings accounts or FDs while carrying less risk compared to equity funds.
Returns on debt funds depend on market conditions but generally fall between six percent to eight percent.
They are suitable for investors seeking regular income with a moderate risk profile.