Low-Risk Ways To Invest & Earn 7% Interest In India

India provides a vast array of investment opportunities, each with the potential to yield good returns. The extensive range of options available can often leave investors unsure of where to allocate their funds. However, selecting the best investment avenue necessitates evaluating one’s investment goals and risk appetite. An investment that aligns with an individual’s needs is likely to produce better outcomes.

Most Indians prefer investing in government-backed instruments as they are perceived as safe investment options.

What are Low-Risk Investments?      

Low-risk investments are all about protecting your hard-earned cash while still growing it. They won’t make you a millionaire overnight, but they offer a haven for your money and some steady returns. Think of it like a comfy chair compared to a roller coaster – less thrills, but a smoother ride.

Here’s the key thing to remember: with low risk comes low returns. There’s a trade-off. You sacrifice the potential for high gains for the security of knowing your principal (the initial amount you invest) is less likely to take a beating.

Now, there are a bunch of different low-risk options out there, each with its pros and cons. We can chat about some of the popular ones like savings accounts, government bonds, or even certain dividend-paying stocks. But before we dive into specifics, I gotta understand what you’re looking for. What’s your investment horizon? Are you saving for retirement in 30 years, or a down payment on a house in 5?  The answer will affect which low-risk route might be best for you.

Some of the most popular investment avenues in India include the following

High-Yield Savings Account 

To ensure that your money is safe and easily accessible, opening a savings account is a critical first step. Not only does it provide convenient liquidity and deposit security, but it also offers competitive interest rates that are calculated daily and paid out quarterly.

By opening a savings account, you’re taking the first step towards effective wealth management that caters to your unique banking and financial needs. One of the main advantages of a savings account is the low monthly balance requirement, which means that you can start small and gradually build up your savings over time.

Moreover, savings accounts offer numerous benefits, including a debit card, high interest rates, and attractive cashback and discounts, making it a smart choice for short-term goals. Additionally, some banks offer fantastic rewards for debit card transactions, which can help you save even more money.

To make the most of your investment, it’s essential to shop around for banks that offer the highest savings interest rates. By doing so, you can earn more interest on your deposited funds, which can add up over time and help you achieve your financial goals faster.

Fixed Deposits

Bank fixed deposits are one of the most straightforward and popular forms of investment. They are widely considered to be a safe and reliable option for long-term investment, making them an attractive choice for investors. While the rules for fixed deposits may vary among banks, they generally provide a secure investment opportunity that yields a significant return on maturity. It’s advisable to consider public sector banks when investing in fixed deposits to ensure that your money is in safe hands.

Investors can choose to invest in fixed deposits either by visiting the bank’s branch office or online. Bank fixed deposits typically offer attractive interest rates, ranging from 6.5% for regular account holders to 7% for senior citizens, for a term period of one year. The term period of fixed deposits ranges from a minimum of seven days to a maximum of ten years, allowing investors to choose an option that aligns with their investment horizon.

National Pension System

The National Pension System (NPS) is a retirement-focused investment option that is managed by the Pension Fund Regulatory and Development Authority (PFRDA). It is designed to be a long-term investment product that provides financial security during retirement.

The minimum annual contribution required for an NPS Tier-1 account to remain active has recently been reduced from Rs. 6,000 to Rs. 1,000, making it more accessible for individuals who wish to invest in NPS. The NPS invests in a variety of financial instruments, such as equity, fixed deposits, corporate bonds, liquid funds, and government funds, among others.

Investors can tailor their NPS investment according to their risk appetite. They can decide how much of their money should be invested in equities based on their individual preferences.

Small Saving Schemes Like PPF

The government has come up with various small saving schemes that provide a highly secure investment option to those who are looking for it. These schemes ensure stable returns with minimal fluctuations. However, the returns on these schemes are lower compared to market-linked products such as Mutual Funds, NPS or stocks.

Despite this, small saving schemes offer a decent margin over inflation and fixed deposits. Some of the long-term small saving schemes that people can consider include Public Provident Fund (PPF), Senior Citizens Savings Scheme (SCSS), Sukanya Samriddhi Scheme, and Kisan Vikas Patra. By investing in these schemes, people can ensure that their savings grow steadily without taking too many risks.

75% GOI Savings Bond 

The 8% savings bond that existed previously has now been replaced by G-Sec bonds, which were introduced in the year 2018. These bonds offer investors an annual interest rate of 7.75%, as the name suggests. What’s more, you can invest in these bonds for as little as Rs 1,000.

One of the key benefits of investing in 7.75% GOI Savings Bonds is that your investment is backed by sovereign guarantees, ensuring that your capital is protected. Additionally, these bonds offer an assured rate of return of 7.75% per year, providing investors with a stable and predictable source of income.

Final Thoughts

Investing and earning 7% interest in India can be done with low-risk strategies. Starting with smaller investments, such as a savings account or short-term bonds, is ideal for those who are just beginning to dip their feet into the investment world. More experienced investors can consider higher-risk investments, such as mutual funds, that may yield greater returns.

Author Bio:

Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She’s been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo, a neobank that offers flexible and customised financial products, along with benefits such as insurance on balance, safe & secure banking, and so on, Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.