Mon. Mar 27th, 2023

Best Investment Options in India

What makes a good investment option? There can be several factors to measure effectiveness of a savings plan, from its flexibility of investing, pre-withdrawal to the amount of tax exemption it allows. For most investors, if you list down, the following factors influence their investment decision more often than not:

a) Freedom to invest and withdraw anytime
b) Flexibility to invest any amount
c) Safer risk-return proposition
d) Custom investment period
e) Tax benefits & other benefits

Depending on your goals and needs you can decide which factor holds more significance to you when investment for a long term. Also, remember you cannot have the best of all worlds; every investment will have a few strong factors, while compromising on others. For instance, when you are investing for high liquidity, you might loose on the overall returns.

Types of Investment Options

You need to invest in plans which fit the need or purpose of the investment. Thus, investment plans can be broadly divided into three types based on their possible uses:

a) Short term or liquid plans
b) Goal-based investment plans
c) Retirement or annuity plans

1. Short-Term or Liquid Investments

These are the investment plans in which you can enter and exit at any time. These are highly liquid investments i.e., you can easily convert these investments into cash. Here the risk-return ratio is low.

The volatility is also negligible in these investments. Thus, they are the best investment options to keep your money safe for short-term needs.

Some Investment options you can consider are:

  • Savings account
  • Super savers
  • Liquid mutual funds

2. Goal-Based Investments

As the name suggests, these are the investment plans which will help you to attain your goal. These are suitable if you want to achieve a goal that has a medium or long-term horizon such as buying a house, ensuring children’s higher education, marriage, etc.

These are not liquid and require time to grow. These investments have entry and exit restrictions.

Examples of Goal-based investment plans

  • Public Provident Fund (PPF)
  • Unit Linked Insurance Plans (ULIPs)
  • Guaranteed Savings Plan
  • Bank and Post Office Fixed Deposits
  • Equity and Debt Mutual Funds

3. Retirement and Legacy Plans

A stress-free retirement is a major milestone that you would like to achieve. Post-retirement, you no longer receive your salary. Thus it becomes important to create a corpus that will be enough to take you through retirement. Retirement plans are designed specifically for just that.

These are not liquid. Plans focusing on retirement mature only at the time you retire. Examples of these plans include:

  • New Pension Scheme (NPS) Tier-I Account
  • Employee Provident Fund
  • Pension Plans
  • Senior Citizen Savings Scheme
  • Whole Life Insurance

Best Investment Options in India

1. Direct Equity – Stocks

Buying individual equity stocks of the companies listed or unlisted on the stock exchanges is known as Direct Equity investment. You can get capital gains or dividend returns from your direct stock investments. The performance of stocks depends on factors such as market position, company’s performance, etc.

a) This option is one of the most volatile investments and has a high risk-return ratio
b) One of the best investment options to generate inflation-adjusted wealth
c) Suitable for a long-term horizon

You need to have a bank account and Demat account to start investing. It is important for you to have a high investment risk appetite if you want to invest and benefit from stock investments consistently.

If you understand the workings of equity stocks and markets well you can invest using your research or advice from a certified broker. However, you also need the ways of managing your investment risk.

2. Equity Mutual Funds

The type of mutual funds where the funds are primarily invested in equity stocks are known as Equity Mutual Funds.

Equity mutual funds can invest anywhere between 70 to 95% of the fund value in equity stocks and related instruments. Since these are equity-based, they offer high risk-return ratio.

a) Actively Managed Mutual Funds

In these types of funds, the fund manager is actively involved in managing. The expertise and capability of the fund manager play an important role in the performance of this fund. He/she chooses the stocks that the fund will invest in based on research and analysis of the companies.

b) Passively Managed Mutual Funds

In this type of fund, the Fund manager doesn’t play a major role. The fund is based on a particular index or market portfolio. For example, a fund that is built up of stocks of NIFTY50, etc. The performance of the index determines the performance of this fund.

3. Debt Mutual Funds or Bond Funds

We have seen that how investing in equity can give you the best of returns but also possess high risk. What if you do not have a high-risk appetite and do not want to take much risk? If that is the case then you can consider Debt Mutual Funds.

In Debt Funds, the amount is invested in fixed income securities including government and corporate bonds, debentures and other long-term fixed income securities. Depending on the type of securities held in the portfolio debt funds can have a varied risk profile.

You should check the ratings of the securities held by the fund to assess the risk before investing.

Funds with top rated securities or government bonds are suitable for you if you want the stability of returns with less risk.

Thus you can consider debt funds when

a) You are risk-averse
b) You want relatively fixed returns
c) Safety of principal is a priority

Note that risk of changing interest rates will still be present in all debt funds.

4. National Pension Scheme (NPS)

National Pension Scheme is an investment designed to help you in your retirement. NPS is backed by the government and is regulated by Pension Fund Regulatory and Development Authority (PFRDA).

NPS helps you to have a strong retirement corpus at your disposal. You can use the NPS retirement account as a salaried or self-employed investor.

There are two types of NPS accounts

a) Tier-I (Retirement Account)
b) Tier- II

The primary difference between NPS and other provident fund investment is that NPS allows you to build your corpus aggressively. NPS follows an auto rebalancing method to maintain a portfolio with a declining risk as you age.

The return on NPS investment will depend on the portfolio mix you choose and the length of time you stay invested.

5. Public Provident Fund (PPF)

PPF is one of the most popular and safe investments for your long-term goals. Originally introduced as a safe retirement investment plan for self-employed, the plan has been popular for long-term investors, because:

a) Tax Efficiency

You can claim deduction under section 80C up to Rs. 1.5 lakhs for ULIP investments. Also, the maturity value is tax-free.

b) Liquidity

You can borrow from the accumulated corpus within the first 5 years of the account. After 5 years partial withdrawals are allowed

c) Risk-Return Mix

Low-risk investment with a market-linked rate of interest, which is updated every year.

d) Investment Period

Minimum 15 years, after that you can extend the account in batches of 5 years.

6. Bank Fixed Deposit

It is a facility offered by the banks that ensures the safety of your invested money and provides stable returns.

In Bank Fixed Deposits, you are required to invest a lump sum amount with the bank for a specific term and at an existing rate. After your term gets over you will receive your principal with the compound interest added over the term.

Things to know about Bank Fixed Deposits

a) Bank FD offers you guaranteed returns. Thus, your principal is safe.
b) You cannot withdraw from your FD till it matures. By breaking your FD before the term, you can lose out on compound interest and incur penalty charges.
c) FD can be both long-term and short-term. The term can be as low as 7 days and can go as long as 10 years.
d) The interest rate agreed upon at the start will continue throughout the term in a Bank FD. Thus, fixed rates of interest continue
e) You can either receive the interest or reinvest it.

7. Senior Citizens’ Saving Scheme (SCSS)

Senior Citizen Saving Scheme or SCSS is an investment option designed for people who are retiring or have retired. It is a government-backed investment option where you can invest in a lump sum and return get a regular income stream post-retirement.

You can open an SCSS account in 2 ways

– Via post-office
– Via Bank

SCSS is a very popular investment option for senior citizens due to its guaranteed and attractive returns. The current rate of returns is 7.4% (as per Q2 FY 2021-22). These rates are subject to change quarterly.

Here are some features of SCSS you should know:

a) You can invest in SCSS if you have attained the age of 60. People over the age of 55 can also apply if they have taken VRS (Voluntary Retirement Scheme).
b) The minimum investment is Rs 1000, i.e., you have to deposit more than or equal to Rs 1000.
c) The maximum investment is Rs 15 lakh. You cannot invest more than this amount.
d) Interest is paid quarterly in SCSS
e) The maturity term is of 5 years which can be further extended by up to 3 years more.

8. Real Estate Investment

Investing in real estate is also a good option. Real estate investment refers to buying properties such as buildings and land. This is one of the best investment options that can combat inflation.

Investing in real estate can give you a shot at both regular as well as capital gain income.

You can let out the building you have purchased for rent. This will ensure monthly returns to you. If your property has appreciated then you can sell for a higher rate and can get a capital gain.

There is a famous saying that there are 3 things important in real estate and they are, ‘location, location, location’. This is the predominant factor that decides the success of your real estate investment.

Having real estate at a good location may be costly but can also get you a higher rate for rent and has better chances of appreciation.

9. RBI Bonds

RBI Bonds are one of the safest investment options in the market. The Reserve Bank of India, i.e., RBI, issues bonds to the public to raise money for the development of various government projects. These bonds have a specific term. After maturity money is returned along with the interest generated.

You can buy RBI bonds from any of the 12 national chains along with 4 private banks. To acknowledge your debt, RBI will issue you a certificate of holding. This certificate will act as proof during maturity.

a) These have a tenure of 7 years.
b) These can be cumulative where the interest is reinvested, and non-cumulative, wherein the interest is given as a regular income.
c) The current interest rate is 7.75%** per annum. This is as per the Floating Rate Savings Bonds, 2020 (Taxable) scheme which started on July 01, 2020.

10. Gold

In India, Gold is often seen as a go-to investment to keep a family’s legacy safe. But rising costs and making charges rates have now made them less attractive.

Nowadays, Gold ETFs are becoming popular. These are commonly known as ‘paper gold’. Gold ETFs contain gold stocks and investments. Unlike expensive gold, these can be brought according to your capacity from the stock market.

Reasons to Invest in Gold

Since this is an ETF, i.e., Exchange Traded Fund, this is managed passively. It is mirrored on the performance of Gold. The better gold performs, the better will be ETFs performance as well.

a) Since traded on the stock exchanges, these are volatile and possess more risk
b) These are liquid and you can enter and exit from them as per your preference.
c) Research well about the stocks before you decide to buy.


It is another government-backed investment option that is available to senior citizens, i.e., those who are 60 and above. This is a good investment plan if you want a regular income stream for yourself.

Just like SCSS, The Pradhan Mantri Vaya Vandana Yojana also offers interest of 7.4% per annum but it has longer validity. The particular rate is with respect to the scheme that is available till March 31, 2023.

Here are some features of PMVVY:

a) Pension payable at monthly, quarterly, or yearly mode
b) It has a maturity date of 10 years
c) The minimum amount you have to invest is Rs 1000, maximum you can invest in a month is Rs 9250.
d) You can use this against taking loans up to 75% value provided you have held it for over 3 years.

12. Guaranteed Saving Schemes

Guaranteed saving plans are a safer alternative of ULIP investments; however, they offer fixed returns.

The returns are guaranteed based on the investment period and the number of annual contributions.

Guaranteed Savings Plans for Investment
Tax efficiencyYou can claim deduction under section 80C up to Rs. 1.5 lakhs for ULIP investments. Also, the maturity value can be tax-free if you invest only up to 10% of the policy sum assured in a year.
Liquidity – Invest and WithdrawYou need to invest for a minimum of 5 years and stay invested for at least 10 years. Partial withdrawals are not allowed. However, you can borrow against the policy.
Risk-return MixLow. Guaranteed savings are safe investment schemes with no equity allocation.
Investment periodDepending on your choice of the premium payment period, maturity period may vary from 10 years to 20 years

What Investment Plans Give the Highest Returns?

Investment returns are often a factor of its performance and your holding period. However few investments promise a fixed rate of return if you can stay invested for a specific time. Thus, you have two types of investments:

1. Fixed Income Investments
2. Market Linked Investments

To generate a good corpus for yourself you should involve a combination of both these investments in your portfolio.

Fixed Investments, also called as non-linked investments are those that will offer you a fixed rate of return. The returns are not linked with the market performance. These investments are less risky and thus offer stable interest rates. These types of investments play a great role in preserving your wealth.

Types of Fixed Investments are:

a) Bank Fixed Deposit/Recurring Deposit
b) National Pension Scheme
c) Senior Citizen Savings Scheme
d) Savings Account
e) RBI Bonds

All these offer you a fixed rate of interest. Note that the interest rate that will be applicable are subject to change from time to time.

Market-Linked Investments, on the other hand, do not offer you a fixity of returns. These have the potential to earn very high returns and thus have no limit. The return you receive will depend on how you manage your market-linked investments.

Factors that can affect your returns

  • Market performance
  • Fund strategy you choose
  • The period you stay invested for

Since they depend on market performance, these are considered riskier.

Examples of Market Linked Investments

a) Stocks
b) Mutual funds
c) ULIPs

What are the Safest Investment Plans with the Highest Returns?

Safe savings and investment plans are those which contain minimal to no risk. These ensure the safety of your principal and give you a relatively low but steady return on your investments.

These can be considered when you want to preserve your wealth and want to park surplus funds.

Safe Investments which offer high returns

a) Debt Mutual Funds
c) Bonds
e) PPF
f) Bank FD

Apart from these, you can consider the following plans from Canara HSBC Oriental Bank of Commerce Life Insurance:

  • Guaranteed Savings Plan
  • Invest 4G with 100% debt fund allocation

Guaranteed Savings Plan is a life insurance cum savings plan that helps you build a savings habit by creating a corpus and also provides a life cover. As the name suggests, this plan will give you guaranteed returns on the maturity of the policy. Thus, you are assured of a specific sum agreed upon at the time of the policy.

This plan also involves high premium boosters and loyalty benefits as well.

Apart from this, Invest 4G can also provide you safety as well as high returns. You can choose to invest in debt options, which possess low risk. You can also use the ‘safety switch; facility which moves your funds to safer options during the ending stages of the policy. All of these investments offer one thing or the other which will help you achieve specific financial goals. Most, importantly all of these schemes offer tax savings or tax-free maturity values.


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