High-yielding investment instruments are deemed lucrative avenues to generate wealth in a short period. However, investment options with high returns are also the ones that are exposed to high risks. This makes them unsuitable for individuals with low risk-taking capacity, especially retirees who do not have any stream of regular income.
To avoid the blow of market risks on their portfolio and savings, individuals with low risk-taking capacity should consider putting their money into those investment options that are known to generate a steady flow of income and don’t expose the portfolio to rampant market fluctuations.
That said, not all low-yielding options would be the best investment plans for investors.
Read along to know more about investment plans for low-risk taking appetite.
Best Low-risk Investment Plans
Individuals who do not wish to expose their portfolio to the market portfolio and want to protect their capital from erosion should invest in investment instruments that offer a steady flow of income.
For instance, these investment plans are deemed ideal for investors with low risks –
Fixed Deposit Schemes
Fixed deposit schemes are widely considered to be one of the safest investment options today. This is because an FD account is not a market-linked scheme and hence it remains affected by market volatility. Also, the fact they yield high returns than savings accounts and offer a higher interest rate to senior citizens further makes them the best investment plan for many. Typically, fixed deposits come with a maturity period that may range from 7 days to 10 years or more, giving individuals the flexibility to choose a tenure that matches their investment objective. Some banks or financial institutions may restrict premature withdrawal during this period or subject the FD account to certain clauses.
Public Provident Fund or PPF
PPF is counted among the top long-term investment plans that offer the benefit of both savings and tax returns. Such a scheme is backed by the government making it reliable and relatively safe. PPF comes with a tenure of 15 years, which can be further extended until the account holder turns 70. Such a long-term plan helps account holders mobilize savings and build a corpus for the future. Individuals can start their PPF account with any amount between Rs. 500 to Rs. 1.5 lakh yearly.
This investment option is the most popular choice for generating higher returns compared to most savings plans. Parking money into top-performing mutual funds that have a record of generating steady returns over the years is deemed ideal for wealth generation. However, mutual funds invest in both stocks and securities whose performance is highly linked with the market forces. This subject the investment option to market volatility and risk of loss.
However, opting for a balanced blend of both debt and equity can help generate steady returns and spread out the risk involved. Notably, individuals can choose to park money into high-risk reward equity funds, steady debt funds, or a blend of both based on their risk-taking capacity.
Equity Mutual Funds
This mutual fund is a market-linked investment option, which invests the majority of the capital in equities and equity-linked securities. Equities are known for generating higher returns, making them a lucrative investment option compared to debt and other saving instruments. However, since the performance of this investment option depends on how well the underlying company performs and other market forces, makes them highly risky.
This is why individuals with a low risk-taking appetite often steer clear of equity mutual funds. However, if an individual decides to go for this investment option, it is often recommended to stay invested in the fund for the long term. This is because the high reward aspect of equity funds also allows investors to recover their losses over time, thus spreading out the risk involved.
Debt mutual funds
This investment option is preferred by most investors with low risk-taking capacity as they are known to carry a moderate risk-return quotient. Debt funds park money primarily in securities such as corporate bonds of companies with GST number, commercial papers, treasury bills, government securities, and other popular money market instruments.
The secured nature of the underlying instruments ensures a steady return on investment while exposing the investor’s portfolio to limited market risks.
National Savings Certificate
NSC is a government-backed savings bond that accompanies tax benefits under Section 80C. To elaborate, the Indian Income Tax Act of 1961 entitles NSC holders to claim tax deductions of up to Rs. 1.5 lakhs in a year. This makes the scheme safe and tax-friendly. Individuals can avail of National Savings Certificate through the Indian Postal Service from any recognizer post office in the country. NSC comes with two maturity periods – 5 years or 10 years. Based on one’s financial goals one can choose a suitable tenure and start their investment in NSC with just Rs. 100.
National Pension Scheme
NPS is a leading long-term retirement plan that is made available to individuals between the age of 18-60. The returns on the National Pension Scheme depend on the percentage of the stock-debt ratio it parked money into. NPS that invested majorly in stocks and a few debt instruments are likely to generate more returns than those schemes that park money more into the debt component. While a higher equity component means greater returns, it also indicates higher risk. Notably, NPS is eligible for tax benefits which allow investors to claim deductions up to Rs. 50,000 under Section 80CCD (IB) along with a maximum of Rs. 1.5 lakh under Section 80C.
Investors who are willing to invest their money for a short duration but are wary of risks can opt for gold investment options. Hands down gold is highly liquid and has a very high demand almost throughout the year. These aspects work in favor of investors as it helps them sustain a banking crisis and even beat inflation. However, what makes gold most lucrative is that the market fluctuations have no effect on the precious metal’s market value.
Not everyone would be keen on holding physical gold but that doesn’t mean one can’t invest in it. Today the market is filled with different forms of gold investment options such as gold coins, gold bullions, gold bars, gold bonds and securities, and digital gold. Notably, each form of gold comes with varying features and limitations. Hence, it is recommended to select a gold option based on one’s needs and requirements.
Regardless of which investment option one pick it is always recommended to develop a balanced approach towards investing and savings. Subsequently, one should always weigh their current financial capacity before investing any amount of money in any investment tool.