Most investors are specific in their pursuit of investment options that not are only risk-averse but also yield sky-high returns in the shortest possible time period. However, if you are an investor too, then please make sure to be clear on the fact that there aren’t any safe investment options in the market that are risk-averse and can offer you higher returns as well because as they say, “the higher the returns, the higher the risk involved”.
So, what you need to do as an investor is look out for low risk investment options that come with a reasonable rate of return. You will have to match your personal risk profile with the risks involved in the investment products shortlisted by you and then make the investment. The best you can do is look for the various investment tools that involve high risk and also have enough potential to generate high inflation-adjusted returns.
While there are quite a few such options in the market, we’ve shortlisted the following 7 options that are worth considering:
- Public Provident Fund:
There is a reason that Public Provident Fund (PPF) is said to be the blue-eyed baby among Indian investors. The two major reasons to do so are:
- Its tax-free annual interest
- Annual compounding
PPF has a term period of 15 years, which leads to great compounding factor, specifically in the later years of the tenure. Additionally, because this scheme is backed by Indian government, it is established as a safe investment option.
Even though PPF blocks the invested money for the next 15 years, it offers much better returns when compared to other safe options such as fixed deposits. One added advantage is that any interest earned on a PPF account is tax-free.
- Endowment policy:
An Endowment policy is basically a type of life insurance policy, which allows the policyholder to save on a regular basis over a specific period of time so that he/she is able to get a lump sum amount as soon as the policy gets matured.
In return for a small premium, the policyholder gets a huge sum at the time of policy maturity, which can be further used to cover equally huge expenses, such as funding children’s education, marriage, buying a house or his/her own retirement. Typically, the tenure of an endowment policy is 10, 15 or 20 years.
- Fixed Deposits:
A Fixed Deposit is, essentially, an investment tool offered by banks as well as non-banking financial institutions, which allows an investor to deposit his/her money and earn a higher rate of interest in return as compared to saving accounts. The depositor can save a lump sum amount in a fixed deposit account for a time period ranging from 7 days to 10 years.
The interest rate applicable is fixed by the bank or particular financial institution and is subject to the amount of money deposited in the fixed deposit account as well. Usually, the investor isn’t allowed to withdraw any money from an FD account before the maturity date; however, he/she can still access this feature if he/she is ready to pay the charges applicable to the withdrawal.
- Pension Plans:
A pension plan is also known as retirement plan where the investor contributes a part of his/her income from salary into an investment plan. Through regular investments, policyholders can create a sizeable corpus, which will provide them with a regular monthly income even after their retirement.
If one is looking for a long-term investment plan, a pension plan is undoubtedly one of the best investment options. The added advantages of the death and maturity benefits provide a sense of financial security to the investors, as they won’t have to worry about medical treatments and associated costs in their old age.
- Stocks and Shares:
Stocks and shares represent the units of ownership, which is actually an equal proportion of a company’s capital. It means that the shareholders will have equal claim on the company’s benefits and equal obligation if the company undergoes any loss or has a debt. Common stocks and preferred stocks are two major types of shares.
It’s important to understand that stocks represent the shareholder’s claim on the company’s assets and earnings; hence, the more one acquires the stocks, the more he/she will get ownership stake in the company.
Again, investing in stocks and shares is always deemed a risky investment while they can still allow you to save money for a long term. Make sure you have done an intensive research before investing in the stocks of a company. If the stocks perform well in the coming years, you can sell your shares at a good margin in the market.
- Real estate:
Real estate includes any real or physical property where the term ‘real’ comes from the Latin root ‘res’, which means things. Real estate can be defined as a property consisting of land and buildings on it, including its natural resources, such as minerals, water, crops, etc.
Real estate is proved to be an ideal long-term investment option. An apartment/flat or a building usually appreciates in its value by a good amount over a time period of 10 to 15 years. Hence, it’s considered to be a good decision to invest in real estate property and selling it in the future for a decent amount of profit.
- Unit-linked insurance plans (ULIPs):
Unlike traditional insurance plans, ULIP plans incorporate the benefits of insurance as well as of investment under a single plan.
This investment tool with the dual benefits is believed to be one of the safest yet best investment options, as it allows investors to invest in the funds of their choice. Besides getting access to the death and maturity benefits, one can also invest a part of their money in the financial funds, which allows them to get a return on their investments along with protection against eventualities.
Some of the aforementioned investment tools are fixed-income, whereas others are market-linked. It’s better for investors to thoroughly analyze their investment needs before deciding to invest in one of the options. Furthermore, for long-term goals and to reap out the most of these investment options, it’s important to balance both of them and make the best use of both worlds.