For risk-averse investors seeking alternatives to fixed deposits, several options offer a balance between safety and returns. Here's an overview:
These funds invest in a mix of debt instruments such as corporate bonds, government securities, treasury bills, and money market instruments. They are managed by professional fund managers and offer the potential for higher returns compared to fixed deposits, albeit with a slightly higher risk.
Fixed Maturity Plans (FMPs)
These are closed-ended debt funds with a fixed maturity date. They invest in debt and money market instruments and aim to provide steady returns over a fixed period. The risk is lower compared to equity funds, but they are less liquid due to their closed-ended nature.
Corporate Fixed Deposits
Issued by companies, corporate FDs often offer higher interest rates than bank fixed deposits. However, they carry a higher risk as they are unsecured. It's important to check the credit rating of the company before investing.
Savings Accounts with High-Interest Rates
Some banks offer savings accounts with interest rates higher than regular accounts. These are suitable for investors who want liquidity along with a modest interest income.
Recurring Deposits
These are term deposits offered by banks where investors can deposit a fixed amount every month. They offer interest rates similar to fixed deposits and are suitable for investors who want to save regularly.
Post Office Time Deposits
Similar to bank fixed deposits, these are offered by the post office. They are government-backed and offer guaranteed returns with various tenure options.
Gold
Investing in gold, either physically or through gold bonds or gold ETFs, can be a haven in times of economic uncertainty. It's a good diversification tool but may not offer regular income like fixed deposits.
National Savings Certificates (NSC)
NSC is a government-backed savings bond that encourages subscribers to invest while saving on income tax. It offers a fixed interest rate with a maturity period of 5 years.
Liquid Funds
These are a type of mutual fund that invests in short-term market instruments like treasury bills and government securities. They offer easy liquidity and lower risk compared to other mutual fund categories.
Senior Citizens’ Savings Scheme (SCSS)
Specifically for senior citizens, SCSS offers a regular income with tax benefits. It is a government-backed scheme and offers one of the highest safety and return combinations.
Each of these alternatives has its own set of features, risk factors, and return potential. Risk-averse investors should consider their investment horizon, liquidity needs, and risk tolerance before choosing an investment option. It's always advisable to consult with a financial advisor to make informed decisions.
