Safe Havens for Savings: Exploring 7 Secure Investment Options
For Indians, saving money is much more than merely a financial strategy. Living with a savings-based approach is part of Indian culture and therefore in the veins of Indians! Amongst the most significant reasons for this approach is the vision of Indians who look decades into the future. And it is from this school of thought that springs the search for secure investment options. If you also resonate with the idea of savings and looking for some secure investment avenues, here are some vital insights into seven of them.
Benefits of Investing Secure Savings Options
Indians prioritize savings, and thanks to the Indian government offering numerous savings schemes, including investment options like bonds. So, savings-based investors can invest in them and accomplish their long- and short-term financial goals. Let’s look at some benefits of investing in secure saving avenues.
Safety and Security
The Indian economic spectrum offers a range of government-backed savings options like the Public Provident Fund (PPF), National Savings Certificate (NSC), and Post Office Savings Schemes. These ensure capital protection and financial security.
Steady and Fixed Returns
Saving schemes also benefit people looking to create a fixed-income stream and earn steady and predictable returns without exposing themselves to any noteworthy risks.
Long-Term Wealth Accumulation
That’s where secure savings investment options outscore many others. Many people look to build long-term wealth instead of earning short-term income. Savings schemes like PPF and NSC demand long-term investments and help accumulate wealth over time.
Saving Habits
Investing in secure savings investment options often requires you to contribute a fixed amount periodically. It helps you develop financial discipline and allocate a particular portion of your income towards saving money for the investment.
Tax Benefits
Many savings options offer tax benefits under Section 80C of the Income Tax Act. Thus, they people to claim deductions on their taxable income.
Portfolio Diversification
From various low-risk options like bank savings accounts and fixed deposits, savings-driven investors can choose options aligned with their financial goals and risk appetite.
Liquidity
Some savings options like fixed deposits have lock-in periods. However, some offer liquidity that allows investors to withdraw funds to address an emergency or imminent financial needs. Withdrawing money halfway through may attract a penalty or loss of interest though. But precisely, which secure investment options are available?
Leveraging Savings to Build Wealth - 7 Secure Investment Options
The Indian investment playground welcomes different types of investment players. From day traders who thrive on daily profits to long-term investors and those looking to save money and build wealth through interest. We are focused on the latter. So, let’s look at seven secure investment options you can consider investing in.
Bonds
Bonds are fixed-income debt instruments that involve the bond issuer (a company or the government) issuing a bond to loan money from public investors. These entities borrow money for a predetermined period at a fixed or variable interest rate. They commit to repay the borrowed amount (the principal amount) at a particular date (bond maturity) and make periodic interest payments to the bondholder.
Companies or governments issue bonds to fund various objectives like infrastructure development, equipment purchase, project completion, geographical expansion, etc. Bonds fascinate investors as they offer a range of benefits, including the following.
- Steady and Fixed Income: Bonds provide predictable income via regular periodic interest payments. Hence, they are an excellent option for people looking for a bankable fixed-income stream.
- Capital Preservation: Bonds with a high rating are considered safer than stocks. They also offer the potential to preserve capital. Hence, for investors prioritizing safety, bonds form a promising and secure investment option.
- Portfolio Diversification: Investors invest in bonds to diversify their portfolios and spread the risk. So, for example, if stocks fail or don’t deliver as much, you may have bonds to potentially compensate the losses to some extent.
- Portfolio Stability: Market volatility is part of the investment horizon. Everyone has their way of dealing with market fluctuations. Bonds are one of them. They can safeguard your investments amidst economic downfalls in which stocks may not perform as expected or fares poorly.
- Liquidity: As an investor, you can sell or buy bonds easily in the secondary market. Thus, you can withdraw the invested sum as and when you need it.
Fixed Deposits
Fixed deposits (FDs) are amongst the most conventionally popular forms of investments. Banks and financial institutions offer these options, wherein an individual deposits a particular amount of money for a fixed duration (from a few days to ten years or so) at a predetermined interest rate, which remains constant throughout the deposit’s tenure and higher than that an investor would earn from a regular savings account.
As fixed deposits offer a fixed income through periodic interest payments, many investors, especially those with a savings-based approach, prefer to invest in fixed deposits. In addition, many fixed deposit options also allow you to withdraw the amount partially or in full with a penalty or loss of interest. Upon maturity, you can choose to reinvest the fixed deposit amount or credit it back to your savings account.
Some benefits of fixed deposits include guaranteed returns, protection of principal amount, and periodic interest payments. Besides, fixed deposits usually remain immune from market fluctuations. Hence, they are popular among conservative investors who look to preserve their capital and earn steady returns. However, it should be noted the returns fixed deposits provide may not always keep up with the growing inflation rate.
Public Provident Fund (PPF)
PPF is a government-based investment scheme that enables you to save Rs. 500 to Rs 1.5 lakh per year and avail of full tax exemption under section 80C of the Income Tax Act, 1961. The scheme is not linked to the market. Besides, it has various government guarantees and returns associated with it. Hence, it is more reliable. The scheme allows you to grow your wealth with compound interest, currently 7.1 percent.
It should be noted that PPF has a 15-year lock-in period. It allows partial withdrawals from the seventh year under specific circumstances. Hence, if you are a long-term investor, PPF can prove an excellent investment platform. Furthermore, you can choose to receive the complete amount or extend the deposit for five more years upon maturity.
National Savings Certificate (NSC)
Another significant savings-based investment option is the National Savings Certificate (NSC). Investors can purchase it at banks and post offices. NSC is a government-backed fixed-income investment scheme that requires a minimum investment of Rs. 1000 followed by multiples of 100 in 12 equal investments or pay the entire amount at once. It has a 5-year lock-in period and provides interests at maturity at a rate fixed by the Ministry of Finance. You can also avail of tax deductions up to Rs. 1.5 lakhs under section 80C.
Unit Linked Insurance Plans
Another savings product is the Unit Linked Insurance Plan (ULIP). It is a single investment plan that offers the benefits of insurance and investment. The scheme involves paying a part of the premium by the policyholder towards life insurance coverage. The remainder is invested in different investment funds like debt, equity, or balanced funds depending on the policyholder's risk capacity and financial objectives.
Some features of ULIPs include flexibility in choosing investment options, switching between funds, higher return potential than traditional insurance plans, and transparency in charges. ULIPs even allow policyholders to participate in the financial market and potentially multiply their wealth while keeping their loved ones protected with the insurance for which they pay through the scheme.
Recurring Deposits
A recurring deposit is an option parallel to a fixed deposit. The option involves investing a fixed amount of money in a pre-defined schedule at a higher interest rate than savings accounts. Recurring deposits provide assured returns as they aren’t linked to the market. You can start with an amount as small as the bank allows you.
Senior Citizen Savings Schemes (SCSS)
Sixty marks the beginning of a new era in everyone’s life. However, for many, that brings financial worries. Accordingly, you can invest in a government-based scheme or investment option like Senior Citizen Savings Schema (SCSS), designed for investors above 60. The scheme offers a guaranteed rate of return, providing a steady income stream and tax benefits. Hence, it is also deemed to be a low-risk option. Furthermore, SCSS offers a higher interest rate. Thus, it can be a viable option for senior citizens.
So, that was about seven promising and secure investment options for investors investing with a savings-based approach. Join Altifi if you are keen on investing in bonds. While offering a fixed-income stream, bonds may yield higher returns than conventional options like fixed or recurring deposits. Sign up with us and enhance your savings journey with bond investments.
Disclaimer: The contents in the article should not be construed as tax or financial advice. Readers should seek advice from their tax or financial advisor before making any investment decision.