For the Risk Averse: Risk Free Investment Options

28 Dec 2019

When it comes to putting your money in any investment vehicle, the fear of losing the money is omnipresent. Anyone who thinks about investing their money, especially in stock market investments, wants to have minimum risk on their plate. In such conditions, the return that one can hope for also reduced, because as the saying goes “with high risk comes high reward”.

An investment where the return is assured is known assurance. The assurance usually comes from a supreme amount of hopefulness in the issuer of the investment, for example, Treasury securities are known as riskless investments because the US government is considered as the best possible issuer.

However, riskless investments have such low levels of returns that they may as well be avoided. Riskless investments usually have a low rate of return and, as a result, it exposed to inflation risk. Risk-free investment options are ideal for individuals who just want to save a part of their earning and sit back and relax without having to worry about its outcome.

Some of the best investment options that can help you park money and relax are:

1. Post Office Savings Schemes

Any saving scheme offered by the post office gives a better return and high rate of interest when compared to the schemes offered by banks and NBFCs. For individuals who look for secure investments, choosing a saving scheme from the post office based on the requirement would be the right thing to do. Anyone can invest as low as Rs. 10 by the schemes which are hard to throughout other institutions.

Some post office saving schemes and interest rate is given against them are as follows:

a) Saving account – 4%

b) 5 Year recurring deposit account – 6.9%

c) Time deposit account – up to 7.4%

d) Monthly income scheme account – 7.6%

e) Senior citizen saving scheme – 8.3%

f) 15-year public provident fund – 7.6%

g) National saving certificate – 7.6%

h) Kisan Vikas Patra – 7.3%

i) Sukanya Samriddhi Account – 8.1%

Not many adopt opening a saving scheme from the post office due to the absence of online account management.

2. Public Provident Fund

PPF is one of the popular saving instruments for a long time and preferred by many for its guaranteed returns and tax-free nature. It is a 14-year risk-free scheme and it can also be enlarged later. Anyone can invest a maximum of 12 times a year. It is also recommended to deposit the money before the 6th of every month to get the interest for the whole month. The interest rate usually ranges from 8% to 8.9%.

Premature withdrawal on a PPF account cannot be done until 4 years of completion. However, some emergencies and life-threatening illnesses will be considered for withdrawal.

3. Recurring Deposit

A recurring deposit is a safe investment tool for individuals who can make a regular deposit every month until a specific period to get a guaranteed return. Once the rate fixed does not change throughout the whole tenure, thus making assume a confirmed estimated return. The interest rate generally ranges between 6.9% and 7.9% per annum. Premature withdrawal is not allowed; however, some banks do allow by levying a penalty.

4. Risk-Free Mutual Funds

Mutual funds such as debt and GILT carry less risk and confidence capital protection for the investor. This type of fund invests in government bonds, commercial papers, debentures, fixed securities, etc. The investment could be for a short, mid or long-term depending on consumer purposes.

5. Savings Account

Though having a savings account is an utmost necessity for managing customer’s finance, this is should be the last option used for investment. The rate of interest offered on customer’s savings is up to 4% per annum. It is a secureplace to save money and good for people who wants to make withdrawals at any time of the year.

6. Fixed Deposit

The fixed deposit is a popular instrument for parking surplus amount of money for a certain period and gets a guaranteed return at the date of maturity. It is totally risk-free and assures capital protection. Anyone can hold the money from 1 month to any number of years in the bank. The interest rate begins from 7.4% and it can go up to 8% depending on the number of years held in the account.

In reality, there is no completely risk-free investment option as every investment carries some risk. It is through proper analysis that one can manage the risks in a way that better returns are achieved. Consult an investment advisor to plan your investments in a systematic manner.

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