Best Low-Risk Investment Options


Best Low-Risk Investment Options

There are many investors out there who are extremely risk-averse and are not willing to take

any chances with their money. If you are one of them, then you have come to the right place.

Below we have enlisted some of the most popular low-risk investment options you can opt

for. But before that, remember that these are the best low-risk investment option and not

zero-risk options. In fact, there is no such thing as a zero-risk investment.

Debt Mutual Funds

Debt Mutual Funds are among the best low-risk investment options available for new or

small investors. The investor doesn’t need to worry about understanding individual bonds and

timing an entry or exit. Considering your concern for low-risk investment, you can always

invest in debt mutual funds. They have low risk but provide better returns as compared to a

fixed deposit or a savings bank account.  

There are various types of debt mutual funds categorized based on ratings such as AAA,

BBB, etc. They are also classified on the basis of maturities such as long-term, short term,

and on the basis of issuer - corporate or government. One can choose whichever suits their

requirements and goals. The risk and expected return for each of these is different.

Corporate Bonds

One can also invest in Corporate Bonds directly through their Demat account. Corporate

bonds are considered less risky than owning the shares of the same company. But to maintain

that low-risk investment option, it is strictly suggested to invest only in highly rated bonds,

especially when someone doesn't have the required expertise.

Government Securities

Investing in Government bonds and T-Bills are considered one of the safest available options

for investments. These securities are backed by the Government and therefore they are highly

secure. In fact, if these bonds are denominated in the domestic currency then the chance of

default is negligible, because as we all know - the Government can always print more money.


But leaving the credit risk aside, investing in government securities do have other risks such

as interest rate risk, liquidity risk, etc. Earlier, investing directly in Government Securities

(G-Secs as they are popularly called) were too expensive and out of reach of the retail

investor. But now you can invest directly in the G-Secs with a minimum amount of Rs.


Public Provident Fund (PPF)

Public Provident Fund (PPF) is the most common instrument for investment by a salaried

individual. PPF offers many advantages.

1. The interest income is not taxable.  

2. There are tax benefits under Sec 80C of the Income Tax Act.  

3. It is a good way to save for your retirement  

The interest rate on PPF is revised every quarter and currently, it offers 7.9% interest as

applicable from July 1st, 2019. It is one of the safest saving instruments in India since it

allows you to build a corpus for retirement or any other long-term goals. The only drawback

with the PPF is that there is a lock-in period of 15 years and one cannot withdraw the funds.

Premature withdrawal to a maximum of 50% of the accumulated amount is allowed in case of

emergencies by the fifth year of investment. However, if you are a long-term investor, there

is nothing to worry about.

Also Read: Debt – The Undeciphered Asset Class | 9 Points to Consider Before Retirement

Post Office Monthly Income Scheme  

It is for individuals who are risk-averse and looking for a safe investment option with decent

returns. But unlike the Public Provident Fund, the income from the Post Office Monthly

Scheme is fully taxable. Hence, your actual returns from the scheme will be lower.  


The investment does not attract any tax deducted at source (TDS). This is a highly safe

investment option since it is guaranteed by the Government of India. The government revises

the interest rates every quarter, based on the benchmark 10-year bond yield.


Unit Linked Insurance Plans (ULIP)

Unit Linked Insurance Plans are provided by various insurance companies as insurance-

cum-investment products. The premium paid by the customer is used in the market and to

cover his life. Usually, they offer a minimum sum assured equal to 10 times the annual

premium. They enjoy tax benefits as per section 80C. ULIPs drawback is that it has a lock-in

period of five years, which means an investor cannot withdraw money before five years of

maturity. Even if you don't want to continue the policy or you stopped the premiums, the pay-

out is released only after the lock-in tenure is completed.

ULIP is unique because it offers death benefit to the investor. Hence, in the case of untimely

death, the nominee will receive the sum assured or the fund value, whichever is higher,

irrespective of the number of premiums paid. For example, if three premiums are paid, each

Rs.50000/-, and the market value at the time of death is Rs.170000/- the nominee gets

Rs.500000/- (10 times the annual premium). If the market value is higher, the same is passed

to the nominee.

ULIPs do not guarantee returns as they are market-linked products which are invested in


Sukanya Samriddhi Account  

Sukanya Samriddhi Account is only for a girl child to encourage education and can be

opened only at post offices and commercial banks. There are several advantages of placing

money in the Sukanya Samriddhi Account. The first and foremost is that you get tax benefits

under Sec 80C of the Income Tax Act. The second is that you build a corpus for the girl child

and if you are a long-term investor then this is a great investment opportunity. The only

worry is that the scheme has a very long holding tenure. The interest earned is tax-free in the

hands of the investor.

Sovereign Gold Bonds (SGBs)  

In times of uncertainty, any investment in gold is deemed as a safe haven, so the yellow metal

is a must-have in your diverse portfolio. SGBs are nothing but an alternative to holding

physical gold and therefore it has many advantages such as-

1. These securities are denominated in units of gold and are issued by the RBI on behalf

of the GoI and can be purchased through various banks. Hence, it is 100% secured, pure and

backed by real Gold.

2. Investors at the time of maturity can redeem the bonds in cash and the gains if any,

are exempted on maturity, unlike physical gold where gains are subject to tax.  

3. Apart from the likely capital gains in SGB, you get an additional interest of 2.5

percent per annum till maturity.  

4. Also, these securities, unlike physical gold, do not entail any costs or risks of storage.

They are being held in Demat form.

5. There is no need to worry about the purity of gold and making charges while

investing in SGBs as there no physical gold involved.


Retail investors can maximum invest up to 4 kg in a financial year. Nonetheless, you cannot

ignore the risk of decrease in value of SGBs due to decline in gold prices. Also, SGB Matures

after 8 years, the lock-in ends from the fifth year. Hence, it is illiquid in nature and benefits

only to those who want to invest in gold for a longer period.


Above we have discussed some of the best low-risk investment options currently available.

One must understand that the choice depends completely on the return objectives and risk

appetite of an individual. Also, when a person has a long-term horizon for investments, other

products such as equity mutual funds, even though slightly riskier, generally offer much

higher returns than the above listed avenues. Therefore, a blend of various risk level products

is recommended for risk diversification to achieve the desired goals.


Also Read:

 Is it good to invest in Debt Funds for long-term? 

Major Mistakes Investors Make in their Life


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