Fixed deposits (FDs) continue to be a preferred savings option for a significant section of conservative investors.
While FDs comparatively offer a lower return with respect to other market-tradable securities, the return on investment just about matches the inflation rate, though.
Amidst the fixed-income investment space, FDs tend to offer guaranteed returns and are regarded as relatively safe considering other market-linked products. In addition, FDs prove to be an effective strategy when it comes to protecting emergency funds from market volatility while acting as a hedge against inflation.
If the relatively lower risk in FDs is to be considered, there are several investment options available to an investor that can provide a superior return without affecting the overall risk of an investment portfolio.
There are various investments, including the RBI bonds, Voluntary Provident Fund (VPF), and Public Provident Fund (PPF), which are a few of the options that can aid in securing a higher return when compared with FDs.
Tate the case of PPFs, which have an interest rate of 7.1%, which is more or less at par with FDs. Moreover, investor benefits in PPFs due to exemption from taxation up to a maximum of Rs 1.5 lakh in a financial year, which is not available in the case of FDs. This results in increasing the overall returns at the time of maturity.
Similarly, RBI bonds offer a return of up to 8%, while VPF provides a return of 8.15%. It is possible for investors to earn a relatively higher return by exposing their investment portfolios to riskier asset classes.
For example, an investor has an option to invest in Real Estate Investment Trusts (REITs), debt mutual funds, and hybrid schemes to boost the return efficiency of the portfolios.
It is important to note that investors should act with due diligence before allocating their funds, considering any uninformed decision involving money can result in raising the likelihood of a downturn.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.