Typically, investors want to make investments in a way that they get a huge return as soon as possible without the risk of losing the principal amount. Investment products that offer high risk-return with a low risk actually do not exist. Risk and investment are directly proportional to each other, i.e., the higher the risk, the higher the returns. So before investing, one should match the risk associated with the product and their own risk profiles. There are few investment products that carry a higher risk but have the capability to generate higher returns while some other investment products carry low risk and generate a lower return.
Below are the five saving schemes you can look at while saving for your financial goals.
- Bank Fixed deposit
In India, a bank fixed deposit is considered as the safest option for investing. As per the rule of Deposit insurance and Credit Guarantee Corporation ( DICGC), everyone who deposits in a bank is insured up to Rs. 5 lakhs from 4 February 2020 for both interest amount and principal.
Prior, the assurance was maximum Rs. 1 lakh for interest amount and principal amount. As per the requirement, one can opt for cumulative interest, yearly, half-yearly, quarterly, and monthly options in them. Bank offers best-fixed deposit rates, and these rates vary. For instance, PNB Housing offers one of the best FD rates in India with a rate of 7.60 %.
- Public provident funds (PPF)
The Public provident fund is one such fixed deposit product many people get attracted to. The impact of compounding of tax-free interest is huge because PPF has a long tenure of 15 years. PPF is considered as the safest investment product as the principal invested and interest earned is backed by a sovereign guarantee, and it offers one best-fixed deposit rates.
- National pension scheme (NPS)
The National Pension System (NPS) is managed by the Pension Fund Regulatory and Development Authority (PFRDA), and it is a long term retirement-focused investment product.
It is a blend of fixed deposit, corporate bond, liquid funds, equity, and some other government funds. Based on the risk-taking capacity, one can decide how much amount of money they want to invest in equities through NPS.
- Debt Mutual funds
Debt Mutual is best suitable for those investors who want stable returns. They are considered less risky as compared to other equity products as they are less volatile. Debt Mutual funds essentially invest in fixed-interest generating securities such as government securities, commercial paper, corporate bonds, and treasury bills, and many other money market instruments. They are less risky but not risk-free; they carry few risks such a credit risk and interest risk.
- National savings certifications
To encourage the habits of savings among Indians, the government launched this scheme. The minimum amount to invest in this scheme is INR 100, and there is no limit for the maximum amount. The interest rate of NSC varies every year. Only Indian residents are entitled to invest in this scheme, and one can assert a tax deduction of 1.5 lakh under the section of 800C of the income tax act.
There you have it, by thoroughly analyzing the potentials of each scheme, you can make the right investment choice.