Conservative investors always looks for safety of an investment instrument along with capital appreciation. Investing in safe instruments will not erode your capital, making it safe when compared to other risky investments.
Investing in risky instruments like equities, equities mutual fund may not be safe but they offer higher returns and can beat inflation.
Here are few things which we need to consider before choosing the product;
Tenure of investment
Before investing one should consider tenure of the investment as it plays a vital role. Returns on the investment depend on the tenure of the product. Investing in products such as equities for short duration can be highly risky due to market volatility.
Liquidity is the ability of the investment product to convert into cash. An investor looking for a longer period, liquidity may not be a significant factor, whereas if the investment horizon is a short period it does matter.
Remember, that taxation is a very important part of investing. If you are in the 30 per cent tax bracket, your returns fall by 30 per cent, if the instruments are taxable, unlike the PPF where the interest income is not taxable. So, you have to keep in mind tax liability as well.
8 Best safe investment options in India
1) Bank Fixed Deposits
Bank fixed deposits are the most preferred financial instruments with interest ranging from 6.6 to 7.5 per cent depending on the bank you invest in.
Returns are taxable depending on the individual tax slabs, any amount exceeding Rs 10,000 for a particular year in a bank will be taxed as per tax slabs.
If your income is not over and above Rs 2.5 lakhs, you can submit form 15G and form 15H.
2) Recurring Deposit
Recurring deposits can fetch you regular monthly income and is good for meaningful savings.
Now, TDS is also applicable on interest on recurring deposits. This is also like bank deposits, where TDS is applicable for sums of over Rs 10,000.
Note that opening RD in post office will not attract TDS as per the latest guidelines.
3) Public Provident Fund
Public Provident Fund (PPF) is one of the favorite instrument of a salaried individual.
PPF offers many advantages. The first is that the interest income is not taxable. The second is that there is tax benefits under Sec 80C of the Income Tax Act. It is a good way to save for your retirement. The interest rate on this has now dropped to 8.1 per cent from nearly 9 per cent a few years ago.
4) Monthly Income Scheme
Post office monthly income scheme is for individuals who are less risk averse and looking for safe investment option with decent returns.
Suitable for senior citizens or retired employees.
The scheme is backed by the Government of India and hence there is ample safety. The interest rates have fallen over the last few quarters, but, it still remains a good bet
5) Senior Citizen Savings Scheme
The Indian government has taken several measures in various sectors for the benefits of the Senior Citizens.
The Senior Citizens Savings Scheme is one such effort.
The interest rate is decided by the government and will be set every quarter. The interest rates have now fallen to 8.7 per cent, from nearly 10 per cent.
The scheme can be opened in post office as well as banks such as ICICI, SBI etc.
Sukanya Samriddhi Account
Sukanya Samriddhi Account is only for girl child to encourage education.
This account can be opened at post offices and commercial banks. The scheme offers tax benefit under Sec 80C of the Income Tax Act.
Debt Mutual Funds
Debt mutual funds have the ability to give you superior returns than bank deposits, as they tend to park some money into equities.
Debt mutual funds are safe as they invest most of the money in debt instruments such as corporate bonds, government securities, fixed deposits of banks, money market instruments etc.
Tax Saving Fixed deposits
Investing in tax saving fixed deposits will provide tax benefits under SEC 80C of the Income Tax Act.
Invested amount you can deduct the sum from your taxable income, thus it will reduce your tax liability.
However, TDS is applicable on the interest income which exceeds Rs 10,000 in a financial year.
Make sure you update the PAN in your account or else 20 per cent TDS is applicable instead of 10 per cent.