With the 2024 Lok Sabha elections counted, the benchmark stock market indices, S&P BSE Sensex and NSE Nifty 50 have tumbled due to high volatility. This unexpected has sent waves through the market, dampening the previously optimistic mood, driven by the exit poll projections of a decisive victory for BJP and Prime Minister Narendra Modi.
PSU stocks led the biggest decline in the Energy sector. Adani Green Energy, Adani Ports and Adani Enterprise are the biggest losers.
Furthermore, amidst the broader market downturn, Reliance Industries Limited (RIL) shareholders suffered a massive loss as the stock tanked by 9.6% on the Bombay Stock Exchange, leading to an erosion of Rs 1.67lakh crore.
Also Read: Surviving A Stock Market Crash
Stock Market stability is a very unpredictable thing, you earn money one day or lose them the next day. But what if there are investment options that are safe and will give returns slightly better than stock markets?
Do you want to know more about them?
Let’s explore some of the safer options for investment.
What are some of the safest investment options?
Below is an explanation of some of the safest investment options in 2024:
-
Fixed Deposit (FDs)
Fixed Deposit is an investment option that has been popular since our grandparents’ and parents’ time because they provide stable returns with minimal risks. It is one of the safest investment options because our money is locked in for a pre-specified term at interest rates varying over the amount and deposit tenure.
Five-year tax saving deposits offer tax deductions up to Rs 1.5 lakh a year under section 80C of the Income Tax Act 1961. Other facilities like partial withdrawal and loans against the deposit are also available. Anyone with a bank account can open an FD for as low as INR1,000 and the minimum tenure is for 7 days.
How to calculate FD interests?
Two methods are used to calculate interest on a Fixed Deposit. One is Simple Interest and another is Compound Interest. Banks may use both depending on the tenure and deposit amount. Moreover, with simple interest, interest is earned only on the principal amount. With compound interest, the interest is earned on the principal as well as the interest.
Now, that you know how the FD interest rates are calculated, let’s know more about the features of Fixed Deposits:
| Feature | Description |
| Low Deposit Amount | The minimum deposit amount varies across banks and NBFCs |
| Fixed Interest Rates | Interest rates remain the same till maturity or renewal. Some banks offer floating rates linked to external benchmarks |
| Interest Payout Options | Monthly, Quarterly, Half-Yearly, Yearly, Cumulative or Compounding interest |
| Premature Withdrawal | Allowed, subject to penal interest rates |
Read More: Liquid Fund Vs. FD: How To Compare The Risks And Rewards
-
National Pension System (NPS)
The National Pension System is a government-based investment and voluntary retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The NPS fund is invested in equities, corporate bonds, and government securities through various investment options. The NPS scheme matures only when the people reach 60. The expected interest rate of NPS investment is 8% to 10% annually.
Why choose NPS?
NPS’s major advantage is tax savings. You can deduct your contributions from your taxable income, potentially lowering your tax bill. NPS is also flexible, allowing you to choose your investment options and adjust your contribution amount as needed. The table below provides information regarding the two types of NPS Accounts.
Key Features Of Tier 1 & Tier 2 NPS Accounts/ Two Types Of NPS Accounts
| Features | Tier-I Account | Tier-II Account |
| Mandatory/Voluntary | Mandatory | Voluntary |
| Withdrawal Restrictions | Cannot withdraw the entire amount till retirement | Can withdraw the entire amount anytime |
| Withdrawal at Retirement | Restrictions on lump sum withdrawal; partial withdrawal | No restrictions; full withdrawal allowed |
| Purpose | Designed for retirement savings | Designed for short-term savings and liquidity |
-
Public Provident Fund (PPF)
PPF is a government savings plan that allows you to invest between ₹500 and ₹1.5 lakh annually and get tax benefits under section 80 C. It offers guaranteed returns (currently 7.1%) and is safe due to government backing. There’s a 15-year lock-in period, but you can make partial withdrawals after 7 years. It’s an excellent long-term choice: you can either collect your money at maturity or extend it in 5-year increments.
How to invest in PPF?
PPF accounts can be opened at almost any bank in India or your local post office. There’s a minimum deposit of ₹500 but you can invest up to ₹1.5 lakh each year. The investment can be done in one lump sum or spread out over multiple deposits throughout the year. You need to fill out an application form and provide your KYC documents for identity verification.
Once your account is set up, you can make contributions online through your bank or deposit cash at a branch. Remember, to keep the account active, you need to make at least one deposit every year. PPF accounts are considered retirement funds. They are low-risk, long-term investments that offer great returns after maturity.
Here is an example of calculating the interest on a Public Provident Fund (PPF) account.
Let’s say a PPF account with an initial deposit of Rs 100,000. The current annual interest rate for PPF is 7.1% as of March 31.
| Year | Initial Deposit (Rs) | Annual Interest Rate | Interest Earned (RS) | Total Amount (Rs) |
| 1 | 100,000 | 7.1% | 7,100 | 107, 100 |
| 2 | 107,100 | 7.1% | 7,607.10 | 114, 707.10 |
| 3 | 114, 707.10 | 7.1% | 8,155.90 | 122,863.00 |
This table breaks down the PPF calculations for the first three years, showing the initial deposit, annual interest rate, interest earned for each year, and the total amount in the account at the end of each year.
-
Systematic Investment Plan (SIP)
If you are looking for an investment option through which your money grows gradually, then SIP is the answer. SIP or Systematic Investment Plan, lets you invest a fixed amount regularly in mutual funds, even starting with just ₹100. While returns depend on the chosen mutual fund and market conditions, you can expect potential annual gains of 10-15% over the long term (especially for plans lasting 3-5 years).
How to invest in SIP?
Do you want to invest in SIPs? Choose a platform like a bank or investment app. Pick a mutual fund that fits your goals, then set up an automatic investment for a regular amount. SIPs handle the rest, making investing convenient and automated.
Let’s imagine that you invest in a mutual fund through SIP. Your monthly SIP amount is Rs 5,000 and you want to invest in XYZ Equity fund. The Net Asset Value (NAV) is Rs. 50 per unit and the SIP duration is one year.
| Month | Monthly SIP Amount (Rs) | NAV (Rs per unit) | Units Purchased | Total Units Accumulated | Total Investment (Rs) |
| 1 | 5,000 | 50 | 100 | 100 | 5,000 |
| 2 | 5,000 | 52 | 96.15 | 196.15 | 10,000 |
| 3 | 5,000 | 48 | 104.17 | 300.32 | 15,000 |
This table illustrates the calculation of SIP investment for the first three months, showing the monthly SIP amount, NAV (Net Asset Value) of the mutual fund, units purchased each month, total units accumulated over time, and the total investment made up to each month.
Read More: A Guide To Nippon India Mutual Fund’s SIPs
-
Gold
Gold is something that every Indian invests in once in their lifetime. Gold’s price often moves in the opposite direction of the stock market, offering a hedge against inflation. Plus, gold prices tend to hold their value over time, minimizing capital loss. Investors can choose from physical gold (jewellery, coins, bars) or paper options like gold ETFs (traded like stocks) and sovereign gold bonds (government-backed). Expected annual returns from gold investments can range from 6% to 10%.
Why it is important to invest in Gold?
Gold as an investment option acts as a shield against inflation, rising in value when everyday costs climb. It also diversifies your portfolio, potentially balancing things out if the stock market dips. Moreover, gold offers long-term value, although it doesn’t always rise or provide income.
Different Options Available To Invest In Gold
| Investment Option | Description |
| Physical Gold | Investing directly in physical gold forms such as coins, jewellery, or ornaments |
| Gold ETFs | Digital units represent actual gold and are stored collectively (These are Exchange Traded Funds that investors can buy and sell without possessing gold physically) |
| Gold Mutual Funds | Invest in companies that mine gold through mutual funds rather than owning gold |
| Gold Schemes | Saving money regularly with jewellers to later buy gold, often with added benefits |
| Digital Gold | Buying or selling gold digitally using online platforms (It allows you to buy or sell gold online in fractions) |
| Sovereign Gold Bonds | Investing in government-backed bonds that represent gold in digital or physical form |
Also Read: 5 Things To Consider Before Getting A Gold Loan
-
Mutual Funds
A mutual fund is an investment tool that pools money from multiple investors and uses it to invest in different stocks, bonds and other securities. In addition to this equity mutual funds give higher returns by investing in different stocks in various sectors. The expected returns from equity mutual funds range from 12% to 18 % annually.
Why should you invest in Mutual Funds?
As an investor, you may not have the knowledge and resources to purchase individual stocks or bonds. In such a situation, your mutual funds are managed by a full-time, professional money-maker who has the prerequisite expertise, experience, and resources to buy, sell, and monitor investments.
Other benefits include risk diversification, affordability, liquidity, low cost, and well-regulated by SEBI (Securities and Exchange Board of India). Additionally, investment in ELSS upto Rs 1,50,000 qualifies for tax benefit under 80C of the Income Tax Act 1961. However, the next question is, how to choose the correct mutual funds to invest in. Below is a table that provides this information.
How To Choose The Correct Mutual Fund?
| Criteria | Description |
| Goals | Define your investment purpose, duration, and expectation. Short-term goals vs long-term goals |
| Risk | Equity funds provide higher risk & return. Whereas, Debt funds offer lower risks and returns |
| Liquidity | If you have short-term needs: choose liquid funds. On the other hand, Long-term (1year+) equity funds offer higher returns due to compounding |
| Fund Performance | Check if the fund has beaten its benchmark over 3,5,7,10 years. Also, assess the fund manager’s track record |
| Expense Ratio | Prefer funds with lower expense ratios |
| Entry & Exit Load | Choose funds with zero or minimal entry and exit load to avoid additional fees |
| Taxes | Thoroughly understand the tax implications on returns, before choosing a mutual fund |
Summing Up
The article explores various investment options available in India, aiming to guide readers towards safer alternatives compared to the volatile stock market. It covers Mutual Funds, Fixed Deposits (FDs), National Pension System (NPS), Public Provident Fund (PPF), Systematic Investment Plans (SIPs), and Gold.
