The safest and the easiest option that people find to invest their funds is to deposit them with bank as fixed deposits. That’s the age old formula. However, with the advancement in the technology and improvement in the financial system of the country, now other outlets are also available in the market where you can invest your money as per your suitability. You will find the difference in these alternatives in terms of rate of return, riskiness, tenure, reputation, volatility, etc. Some of the alternatives that can offer better results as compared to bank fixed deposits are as follows:
Public Provident Fund (PPF) – If you are ready to wait for 15 years and are looking for fixed monthly earnings during your old age, then you can start investing in PPF. This option is risk free and offers a good rate of return. At present the rate of return is 8.70% per annum which is compounded annually.
Kisan Vikas Patra – If you invest in this scheme, then the money you invest will double in 8 years 4 months, i.e. 100 months. This means you will get an annual rate of return of 8.67%. All you need to do is invest in the denominations of Rs. 1,000, Rs. 5,000, Rs. 10,000 and Rs. 50,000. Since it is a government savings scheme, the risk factor is absolutely missing. People might argue that the rate of interest on bank term deposits has gone up to 9%. But check the statistics, you will find more fluctuations in the bank’s rate of interest than you will find in the rate of return of Kisan Vikas Patra. The lock period is 2 years and 6 months. After this period, one can get their certificates encashed. After this period, investors can redeem in interval of every 6 months.
National Savings Certificate (NSC) – This option is best suited for those who can wait for 5 years or 10 years. If you wish to invest in NSC VIII issue which is for 5 years then you can get 8.5% interest income per annum. Invest every year in NSC for 5 years and after that from 6th year onwards, for next 5 years, you will continue to get good returns. Therefore, with this way, you can set a loop of earnings for yourself.
Sukanya Samriddhi Scheme – If you have a girl child aged less than 10 years, then you Sukanya Samriddhi Scheme is a very good investment option for you. You can open one account for each of your girl child for a maximum of two girl children. The amount of deposit in one financial year can range from Rs. 1,000 to Rs. 1.5 lakhs. This scheme offers a wonderful rate of return of 9.2% per annum.
Post Office Term Deposit – Term deposits with post office is a simple option and can be opened with a mere deposit of Rs. 200 and can go to any amount as per your desire but in the multiples of Rs. 200 only. These deposits can be made for 1 to 5 years and will fetch you an annual returns of 8.2% to 8.5%. The interest on these deposits will be paid annually but compounded quarterly.
Stock markets – Stock markets is a very good choice for investment but as compared to above mentioned investment alternatives, the option is quite risky. However, if you know the rules of the game and are comfortable in identifying the right kind of stocks and the right time of investment, then it can be a lucrative way of getting more returns as compared to bank fixed deposits.
Equity mutual funds – If you do not want to spend your time and energy in identifying the perfect stocks for yourself, then you can find out few good mutual funds with investments in equity stocks. The rate of return of these equity mutual funds is more as compared to other mutual funds. Since the mutual funds are managed by specialized fund managers, the risk you are exposed to would be less in comparison to direct investments in equity shares.
Debt mutual funds – Mutual funds investing in only debt funds are less risky than equity mutual funds. However, in comparison to equity mutual funds, they provide less rate of return but if you compare the rate of return of good debt mutual funds with bank fixed deposits, then you will find the debt mutual funds as more rewarding.
Real estate – Real estate is known as a sector for all times. At times, you may find recession in this sector, but it will be for short term only. If you are a long term player and want good returns in one go, then you can invest in real estate. Though the liquidity is very low in this sector but rate of returns are good.
National pension scheme – If you are a resident or non-resident Indian citizen in the age group 18 to 60 years, then you can subscribe to this scheme. National pension scheme is a market linked scheme. For this reason, there is no guarantee of returns. But the rate of return is good.
Corporate FDs/ NCDs – Corporate fixed deposits are more rewarding than bank fixed deposits and generally offer returns ranging from 12% to 15%. But, investment in corporate term deposits is risky whereas the investment in bank term deposits is risk less.
While you are investing in any of the above mentioned alternatives, you need to weigh these alternatives in light of your risk appetite, expectations on returns and the waiting period. Accordingly, you can decide whether you want to invest in bank FDs or somewhere else.