What Is Fixed Income Investment? Top 5 Fixed Income Investment Options In India

Recent economic turmoil has diverted investors' attention away from equity-oriented plans to fixed-income investment options, particularly retirees or conservative investors. Simply explained, fixed-income investments offer fixed income as a regular kind of return.

Fixed Income Investment

A fixed rate of return is offered on an investment with a fixed income for a specific amount of time is known as a fixed income investment. They are best suited for investors with a short to medium-term investment horizon. Bonds, Government-backed Guaranteed-return schemes, and FDs all fall under the category of fixed income assets, which can carry less risk and have a lower correlation with the stock market than stocks. Fixed income can give do-it-yourself investors the opportunity to diversify their online investment holdings. These kinds of investments can give you a steady stream of regular interest payments that will eventually recover your money.

What are the top 5 Fixed Income Investment Options in India?

India, being a sensitive market, makes investing a sensitive issue. As a result, individuals who wish to save money without exposing themselves to market risk, find fixed-income investment options best to secure the return. While market-based investment alternatives provide rapid expansion and better returns, one can choose fixed income investments to receive fixed returns on their investments every quarter or at maturity without exposing themselves to market volatility.

An investor wishing to further diversify their online investing portfolio may choose to explore fixed-income investments. An online investor seeking stability, a guaranteed return, and reduced risk may think about investing in fixed-income investment options available in the market. Here are the top 5 Fixed Income Investments Options in India you can use to earn fixed income on your investments.

1. Senior Citizens Savings Scheme (SCSS)

SCSS is a government-backed scheme that offers a fixed return on investments. As the name suggests, this scheme is available for senior citizens i.e. people above 60 years. One can start investing in this scheme by opening an account via Post offices and banks.

Recently, the India Government has hiked the interest rates on this scheme by 20 bps for the October-December quarter. Now, it offers 7.6%, and the previous rate of interest was 7.4%.

2. Pradhan Mantri Vyas Vandana Yojaja (PMVVY)

PMVVY is a pension scheme for senior citizens. PMVVY Scheme is another fixed-income investment option backed by the Government of India. It was introduced to allow senior citizens to earn monthly pensions. 

Senior citizens can subscribe to this scheme from the Life Insurance Corporation (LIC). Currently, PMVVY offers interest rates up to 7.40% annually. 

3. Post Office Monthly Income Scheme (POMIS)

POMIS is another government-backed fixed income investment option available to get fixed and regular income as a return. It is a popular investment option among conservative investors as a great way to earn a regular fixed income. This scheme is best suitable for investors who want to earn a regular fixed income with guaranteed returns at a fixed rate of interest every month.

Recently, the government of India raised the interest rate on this scheme by 10 bps, from 6.6% to 6.7%, effective from 1 October to 21st December 2022. 

4. Fixed Deposits with Banks/NBFCs/Post Offices

Except for the increased rate of return, fixed deposits operate similarly to a standard savings account. Prior to the lock-in period, the investor is not allowed to withdraw any investments. Bank FDs provide assured returns while maintaining the principal. FDs are the most popular Fixed income investing option among conservative investors, particularly risk-averse investors.

In the current scenario of rising interest rates FDs are gaining their lost charm. With FDs, one can earn a maximum of 7 to 8.50% returns on investments depending on the investing institution, whether it is Bank or NBFC. 

The post office also offers FD under National Savings Time Deposit (TD) Account for maturity periods 1, 2, 3 and 5 years, respectively. Recently the government of India hiked the interest rate for this scheme. Now, it offers 5.5% on 1 year TD, 5.7% on 2 year TD, 5.8% on 3 year TD, and 6.7% on 5 year TD.

The Post Office MIS is a secure investment option as it is backed by the Government, unlike FDs by NBFCs. 

5. Public Provident Fund (PPF)

PPF is one of the safest fixed-income investment options available in India, which is fully guaranteed by the government. PPF accounts are simple to open at banks and post offices. A PPF account may be held for a maximum of 15 years. To achieve secure returns over a longer term, one can extend it for an additional 5 years. Every three months, the government changes the interest rates for PPF accounts. For the Q3 FY 2022-23, the government of India didn't change the interest rate for the scheme. Currently, the PPF interest rates are 7.1%.