7 Best Low-Risk Investment Options In India 2024

Securing your financial future in today's financial world has become the utmost priority for any individual, given the volatility in the current economic landscape. Savings are an important part of this process, and every individual should start from a young age. However, it is crucial for you to understand that a secured financial future can be attained only if you invest your savings in some investment options that not only keep your hard-earned money in a safe undertaking but also generate significant returns so that you can achieve your future goals. The mantra should be to invest in such a way that your money keeps growing at a steady pace and outpaces the growing inflation.

Its 2024 and India presents a diverse array of investment avenues catering to risk-averse individuals. The choices are immense, and hence, it is important to understand the nuances of low-risk investment options. This blog will help you understand and provide you with a strategic approach to choosing the best low-risk investment option.

Why should you opt for Low-Risk investment options?

While investing, Individual investors should look for investment options that preserve their hard-earned money and give them a significant return on investment. For individual investors, embracing low-risk investment strategies is often a matter of prioritising capital preservation over aggressive growth. The rationale behind this approach is multifaceted. Firstly, low-risk investments offer a safer haven for hard-earned savings, shielding them from the volatility inherent in high-risk ventures. Secondly, they provide a stable source of income, whether through interest payments or dividends, which can be instrumental in meeting financial obligations or supplementing retirement funds. Moreover, low-risk investments tend to be more liquid, allowing for easier access to funds when needed.

Choosing the best low-risk investment option could be difficult due to the immense number of options available; however, what you have to keep in mind is to minimise your potential loss while maximising gains.

7 best low-risk investment options in India for 2024

1. Fixed Deposit

Fixed deposits (FD) have long been a staple in Indian households, renowned for their simplicity and security. Offered by banks and non-banking financial companies (NBFCs), FDs provide a predetermined rate of interest for a fixed tenure, ranging from a few months to several years. Even though FDs have a modest rate of return on investment, they are extremely safe investment solutions that guarantee returns and protect deposited funds. Certain banks like HDFC Bank, SBI, and others also provide higher interest rates on investments, particularly to senior citizens. The interest earned is typically subject to income tax, but the principal investment remains safeguarded, making FDs an ideal choice for risk-averse investors seeking stable returns. For example, the Union Bank of India provides a modest interest rate of 6.5% for an FD of 5-10 years; it even goes to 7.25% for short-term FDs.

2. Debt Mutual Funds

Debt Mutual Funds is an investment option that pools your money and invests it in a variety of fixed-income securities, bonds, commercial papers, certificates of deposit, and money market instruments. Your money is invested in a variety of instruments by the fund manager overseeing these funds. In addition to having lower risk than conventional fixed deposits, these funds offer higher returns. These funds vary the returns in accordance with market rates.

The rates for debt mutual funds change based on how long you want to invest your money. Mutual funds for short-term debt typically yield returns of 7.5 to 7.7%, while long-term funds, depending on the fund, can yield returns of 5-8% annually.

3. Gold

Gold has been a trusted investment in India for generations. It's not just a cultural symbol but also a tangible asset that can protect your money against inflation and economic uncertainties. Individual investors can consider investing in gold through physical gold or gold exchange-traded funds (ETFs).

Investing in physical gold involves buying gold coins, bars, or jewellery. However, this requires secure storage and may involve additional costs like making charges and locker fees. Gold ETFs, on the other hand, offer a more convenient way to invest in gold. These funds are traded on stock exchanges, and the price of physical gold is tracked. Through gold ETF, you own a share in fund gold holding without owning actual physical gold.

Popular gold ETFs in India include SBI Gold ETF, Axis Gold ETF, etc., offering a lucrative annual return of around 20%.

4. Post Office Monthly Income Scheme

Individual investors in India can earn a steady monthly income through the Post Office Monthly Income Scheme (POMIS). It is a low-risk investment option and offers an appealing 7.4% annual interest rate. This is especially true for individuals who need regular income to cover their daily costs. Because the Indian government supports it, this scheme is just as safe and secure as fixed deposits. This implies that you could make investments while guaranteeing a high degree of capital security. With POMIS, investors can start investing with as little as Rs 1500, and the scheme allows for flexible cash withdrawals after a year to accommodate unforeseen expenses.

5. Fractional Real Estate Investment

Real estate has long been a profitable and low-risk investment option, but the high costs often discourage individual investors. Fractional Real Estate investing offers a solution by allowing you to own a portion of a property without the full financial burden. These are issued by a Special Purpose Vehicle.

You can invest in a fractional share of a residential or commercial property. This gives you potential returns from rental income and capital appreciation if the property value rises over time. The initial investment is much lower compared to purchasing an entire property. This also diversifies your investment portfolio. There have been active developments in fractional real estate SEBI. It is becoming an increasingly liquid and much safer investment option. However, it is important to research their past performance, fees, and property options before investing.

6. Peer-to-Peer (P2P) Lending

Peer-to-peer (P2P) lending is a new way to invest and earn returns by lending money to individuals through online platforms. As an investor, you can provide personal loans to borrowers and earn interest on the amount you lend. While there is some risk involved in this type of investment, this can be minimised by choosing reputable P2P platforms that thoroughly evaluate the borrower's creditworthiness to minimise your risk. You can expect a significant return on your investment lending. You can further reduce the risk by spreading your investment across a diversified portfolio of borrowers instead of lending a large sum of money to a single borrower.

7. Corporate Fixed Deposits

Corporate Fixed Deposits are another low-risk investment option that can keep your investment safe and generate a significant return on your investment. It offers slightly higher returns than FDs. It is issued by reputable NBFCs and corporations. The concept is similar to bank FDs, in which you invest a lump sum for a fixed period and earn interest upon maturity. These funds are untouched by market volatility and are suitable for both short-term and long-term investment goals. You can also call back the FD before the maturity period in case of emergency, and you will be returned your principal amount along with interest, making it very flexible.

There are several Corporate Fixed Deposits like ICICI Home Finance, Shriram Finance, Mahindra Finance, etc., offering a lucrative investment of 7-8.7%.

Conclusion

Every investment choice requires you to do extensive critical research on the fund you are investing in. You need to assess your risk tolerance and compare which option suits you the best. In addition to reducing risks, diversification across a number of low-risk investment options can produce a balanced portfolio. The best low-risk investment option should be able to secure your hard-earned money from market volatility and provide you with positive, steady returns.

Low-risk investment options are always changing in India's financial environment, providing investors with a way to achieve financial security without having to take unnecessary risks with their hard-earned money. Individual investors should confidently choose an investment option that would fulfill their needs at times of distress and protect them from future uncertainties while still yielding moderate returns.