Best risk free investment with high returns

Best risk free investment with high returns

Risk and return is a very important theory while we consider making money. The analogy between risk and return is that these are proportional to each other. High risk investing produces higher returns While Low risk investment yields in lower returns. However, this theory still does not stand true in most of the investment scenario. People took extreme financial risk and loose all of their wealth. So, Before investing in any assets, you should remember that risk must be calculated and you have to prepare yourself for it. 

"Only taking high calculated risk generates more less-risky return." That is the philosophy behind investing that every investor must comprehend. 

In the below article, we are gonna discuss about some of the best risk free investment with high returns. In such investments, chances of losing money is far lower or almost negligible. Fortunately, there are such options for individuals in India where they can put their hard earned money to get handsome return and support the country economy. Some of these are as follows-

• Debt Mutual Funds
• National Pension System (NPS)
• Fixed Deposits
• Public Provident Fund (PPF)
• Senior Citizen's Savings Scheme
• Real Estate
• Pradhan Mantri Vaya Vandana Yojana
• Gold
• Municipal Bonds
• Certificate of Deposit
• Annuities

Let us talk about each one of them briefly-

Debt Mutual Funds

A debt mutual funds are also referred to Income funds or Bond funds. As the name suggests, these funds invests pooled money in the debt instruments that generates fixed amount of money for a stipulated time for such mutual funds. It implies that returns are more stable than other investments. Such debt instruments include fixed income instruments, such corporate & Government bonds, corporate debt securities and other money market instruments which offer guaranteed capital appreciation. 

Although in debt instruments, there are other risks associated which includes interest rate risk and credit risk. These are very small relatively. To hedge such risk, you can invest in other mutual funds that operates in instruments that carry high credit and safety ratings.

National Pension Scheme

The NPS is a long-term retirement focused savings plan offered by Ministry of Finance, Government of India. It is one of low-risk and high return investments for all individuals. In this scheme, you have to invest a certain amount till the age of 60. Once an individual reaches 60 years of age, he/she will be eligible for 60% withdrawal of accumulated wealth in lump sum amount. The remaining 40% of the corpus goes into annuities giving a monthly income for lifetime in the form of pension. 

The level of risk is almost negligible as NPS is totally backed by Government of India. Meanwhile, returns associated with such schemes are market-linked which would be roughly around 8% to 10%.

Public Provident Fund

PPF is another Government-backed long-term savings scheme that yield in hassle-free high return, In this scheme, an individual can contribute with a minimum amount of Rs. 500 and maximum contribution of up to Rs. 1,50,000 per year. However, there is a lock-in period of 15 years. He/she can not withdraw money till the upcoming 15 years of the scheme activation. Yes, you can opt for partial withdrawal after the expiry of 5 financial years. 

The rate of interest is fixed by the GoI and it get revised every quarter. You can check rate of interest for PPF using NSI Website.

Fixed Deposits

Fixed deposits are one of the most traditional and popular investment vehicle. It offers a lot of flexibility in terms of tenure and interest pay-out frequency. Besides banks, NBFCs also provide Fixed deposits for all income groups. NBFC's rates of interest are much higher than banks. 

FD's Interest rate are dependent upon the RBI's repo rate. As repo rate increases over time so does the FD interest rate. Risk associated with fixed deposits is also negligible as compared to market linked instruments and equity. 

From safety perspective, you get an automatic risk cover of Rs. 5 lakhs from the deposit insurance and credit guarantee corporation in case of bank deposits. While in NBFC fixed deposits, you can opt for investing in a plan having high credit rating.

Senior Citizen's Savings Scheme (SCSS)

SCSS is another low-risk and high return government offered investment vehicle that for those individuals who crossed 60 years of age. This scheme is fixed tenure investment option i.e. 5 years and an individual can deposit 15 lakhs a year in such investment as one-time lumpsum amount. An SCSS account can be open at nearest post office or at a bank. 

GoI offers a fixed interest rate on the deposited amount which can be withdrawn on every quarter. You will also be eligible for tax benefits under 80C of The Income Tax Act, 1961. Investors can also withdraw the money during the lock-in period in case it is necessary.

Real Estate

Real Estate investing is also considered low risk and high return investment strategy. However, it requires a special attention on location, government rules & regulations, and overall real estate market trend. Real estate could make money exceptionally high in the long-run as India is a developing nation and has a huge population. To accommodate growing population, there would be a high demand in residential and commercial property. However, it is always advisable to thoroughly investigate into the all aspects of realty. 

Boom in real estate is a sign of good economy and it boost the other sector of the economy as well including banking, insurance, retail, finance, and etc. 

Pradhan Mantri Vaya Vandana Yojana

PMVVY is launched by Life Corporation of India (LIC) in 2017 and it is backed by Government of India. It primarily focuses on the senior citizens offering nearly zero risk and high returns in comparison with the traditional investment options. PMVVY is insurance linked pension scheme to the elder citizens providing them and their families a better financial stability. PMVVY offers the following benefits in general to the senior citizens older than 60 years-

• Financial stability on retirement via pension payment
• Return assurance
• High surrender value
• Maturity benefits
• Death benefits
• Free lock-in period
• Loan facility on the policy

Similar to SCSS, you can invest up to 15 lakhs at an interest of nearly 7.4% per annum.

Gold

Gold is considered as God's Money. It is considered valuable all across the globe. There will be always a demand for Gold. It is always considered that there may be price fluctuation in gold price but in the long-term, Gold used to increase in value. It is often also considered as an alternative to other investment to hedge risk; It means that whenever the other investments including stock market, real-estate, bonds, and etc. poses a high risk due to value deterioration and extreme price fluctuation then investors invest their wealth in buying the gold that results in high price of gold. Hence, we can say that there is a trade-off between Gold price and other investment. 

Municipal Bonds

As the name represents, there are the debt instruments issued by local urban municipal corporation. Municipal bonds are used to raise funds for the development works and regulated by SEBI. The maturity tenure for these bonds is generally 3 years with interest payments as per prevailing market rates. Investor can receive interest periodically or on maturity. Similar to other investments, Municipal bonds are low-risk and high return financial instruments.

Certificates of Deposits

CDs are heavily regulated by Reserve Bank of India; hence offering very low risk and high value. These are usually issued by the banking institutions and are short-term money market instruments. Certificates of Deposits are issued in dematerialized form means investors will need a demat account to invest in these instruments. A CD is always issued at a discount price to its face value and difference between purchase value & redeemed face value is referred to as return on investment. 

The minimum deposit amount is Rs. 5 lakhs and you can invest as much money in the multiples of Rs. 5 Lakhs. 

Annuities

Annuities are other types of low-risk and high-return instruments issued by insurance provider companies. Annuities provides a life risk cover with a guaranteed monthly return throughout lifetime. Annuities investment can be done in two methods-

• Immediate Annuity
• Deferred Annuity

In Immediate Annuity, you purchase the plan by depositing a lump-sum amount and in return, you will start to receive a monthly pension from the immediate next month for the lifetime. While in deferred annuity, plan is purchased either paying the lumpsum amount or in regular premium payments. Unlike Immediate Annuity, you will not start getting monthly pension immediately; You will get the monthly pension after a specific time as mentioned in the plan. 

Hence, Annuities are a great low-risk investments over the other instruments as it provide you a life cover and monthly pension resulting in multi-fold return. 

As per your risk profile, an investor can consider any instrument for investment depending upon the interest, need, and alternatives to other investments.