Low Risk Investing for Beginners – Which are the Avenues?
If you are new to the world of investing, you would prefer maximum returns while taking minimum risk. However, it is not easy to do that as there is always some risk in investments, especially market-linked investments. If you are starting your investment journey, it is advisable to initially invest in low-risk investment avenues and then slowly build a portfolio around it with some high-risk and high reward investment instruments.
While looking for low-risk investments, search for avenues that are not market-linked. These instruments, generally, offer guaranteed returns with very low risks. There are numerous low-risk investment options available today. As a beginner, you might get confused about where to put your hard-earned money. To make things simple, let us understand the different low-risk investments avenues available in the country:
- Fixed Deposit (FD)
Fixed deposits are the most popular investment avenues for the people in India. They are also considered one of the safest forms of investment. They offer guaranteed returns which are typically higher than interest on savings accounts. The current interest rates on Fixed Deposits in the country range from 5% to 6%. If you are looking to invest in an FD, you should ensure that the bank or the institution is credible so that your money is safe.
- Public Provident Fund (PPF)
This is another widely known investment scheme that is government-backed and therefore, there is little risk in these investments. It offers attractive interest rates with a 15-year lock-in period. The proceeds invested in PPF are eligible for tax deduction up to Rs. 150000 under section 80C of IT Act. For beginners looking to build long-term wealth, PPF is a very good option as it has a sovereign guarantee and provides decent returns.
- National Savings Certificate (NSC)
National Savings Certificate is a low-risk investment option that has attractive interest rates. It has a 5-year lock-in period, and the minimum investment amount is Rs. 500. These instruments carry a sovereign guarantee and can be bought from the post office. The investments made in NSCs are eligible for tax deduction under section 80C of the Income Tax Act.
- Exchange-Traded Funds (ETFs)
If you are into online stock market trading and love to take some risk, then exchange-traded funds can be a good choice for you. ETFs are similar to mutual funds as they are pooled investment vehicles investing in different securities. ETFs are a collection of various securities like bonds, debentures, shares, etc. An ETF derives its value from the underlying assets it is tracking. ETFs can help you diversify your portfolio by investing in market-linked assets. Beginners can look to invest in ETFs for long-term wealth creation. There are many ETF options available in India. Investors can take exposure in technology stocks via Technology ETF or other ETFs as they deem fit.