Best Low-Risk Investment Options

Manish Kothari
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Manish Kothari

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. 10,000.

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.

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 equities.  

Sukanya Samriddhi Yojana (SSY) 

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:

Senior Citizens Savings Scheme (SCSS): Interest Rate, Eligibility, Benefits, Calculation

Post Office Saving Schemes: Types, Plans, Benefits, Who Should Invest

Post Office Time Deposit: Scheme Interest Rate, Eligibility, Risks, Calculation

Sovereign Gold Bond Scheme: Price, Eligibility, Interest Rate, Capital Gains

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