What are the best low risk Investment Options that give more return than your bank account?

Manish Kothari
20 Likes | 1342 days ago



isVerifiedExpertAuthor is a Zfunds Verified Expert
Manish Kothari

There are many investors out there who are extremely risk-averse and don't want to lose their money. If you are one of them, then you have come to the right place. Below we have mentioned some best low-risk investment options you can go with. But before that, remember that these are the best low-risk investment option and not the risk-free options. In fact, there is no such thing as a risk-free investment except the central govt. bonds issued in domestic currency. 

Debt Mutual Funds

Mutual funds are the best low-risk investment options for new or small investors. This is because the investors need not worry about knowledge of which stock and bond they should invest in and which one they should exit from. 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 distributed on the basis of ratings such as AAA, BBB, etc; on the basis of maturities such as long-term, short term, etc and on the basis of issuer - corporate or government. You can choose whichever suits your requirements and goals. 

Corporate Bonds

You can also invest in corporate bonds directly with your 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 you don't have enough knowledge.

Error! Filename not specified.

Government Securities

Investing in Government bonds and T-Bills are considered as one of the safest available options for investment. 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 '0' because as we all know - govt can always print the 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 govt. securities were too expensive and out of the reach of the retail investor. But now you can invest directly in the G-Sec with a minimum amount of Rs. 10,000. The two platforms offering this service to retailers are Zerodha Coin and NSE goBID.

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. However, if you are a long term investor, there is nothing for you to worry about. It is one of the best safe saving instruments in India since it allows you to build a corpus as well for retirement. The only drawback with the PPF is that there is a lock-in period 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. 

Post Office Monthly Income Scheme 

Best low-risk investment options

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. However, the investment does not attract TDS. This is one of the safe investment options in India since it is guaranteed by the government of India. Again, the government revises the interest rates every quarter, based on the benchmark 10-year bond yield. To invest in this scheme click here.

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

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

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 the 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 rate of interest on this scheme is also changed on a quarterly basis, though the govt. can keep rates unchanged. 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 concern about the purity of gold and making charges while investing in SGBs as there no physical gold involved.
Best low-risk investment options

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 non-liquid in nature and benefits only to those who want to invest in gold for a longer period. To read more about investing in gold, click here.


Above we have discussed some best low-risk investment options. But you'll have to understand that for an investor with a very long investment horizon, should not invest his entire portfolio in these instruments. Rather you should invest more in equity mutual funds because, in the long run, it will generate you significant returns under considerable risk.

Comments (1)


Chandra Kamal



Get Investment Advice from India's Top Experts