Gold has always been considered the most reliable way to protect against inflation. You can invest in physical gold, gold ETFs or sovereign gold bonds.
As the Reserve Bank of India (RBI) is slashing the repo rate for the first time in five years, many banks, including public sector ones, have revised their interest rates on fixed deposits (FDs). FD customers, especially senior citizens, have enjoyed high interest rates on their investments for the past many years amid a high-interest regime in India. But since banks have started revising downwards their FD rates, many investors would be now thinking about exploring other investment avenues to get better returns.
If you are looking for better returns than fixed deposits (FDs), then you have many great options to explore. FD gives security and fixed interest, but its interest rates often fail to beat inflation. This is why investors now need such options that give better returns and also keep the risk balanced.
Let’s explore the seven best options of FDs, which are divided according to your risk-taking capacity. Whether you want a completely safe investment or are ready to earn more returns by taking a little risk, this write-up will guide and help you make the right decision.
1. Savings accounts in small finance banks
If you want to get better interest rates than FDs and maintain full liquidity, then savings accounts in small finance banks can be a better option. These banks offer interest up to 7 per cent, which is much higher than the traditional banks.
What are the advantages?
Better interest rates than FDs (up to 7 per cent)
Instant access to funds (no lock-in)
Insurance protection up to Rs 5 lakh (by Deposit Insurance and Credit Guarantee Corporation)
What are the disadvantages?
Interest rates may change from time to time
Some banks have a minimum balance requirement
Can be difficult to beat inflation
2. Post Office Savings Schemes
If you want complete safety and a government guarantee, then the post office National Savings Certificate (NSC) and Public Provident Fund (PPF) can be the best options.
What are the advantages?
Safe investment with the government guarantee
Tax savings under Section 80C
Higher returns due to compounding benefits
What are the disadvantages?
Long lock-in period (PPF – 15 years, NSC – 5 years)
Interest rates may change every quarter
Not all schemes can fight inflation
3. Government Bonds and RBI Bonds
If you want better interest than FD with complete safety, then government bonds and RBI bonds are the right choices. They give stable returns for a long period.
What are the advantages?
Safe investment with government guarantee
Better interest rate than FD
Tax exemption in some bonds
What are the disadvantages?
Long lock-in period
If interest rates rise in the market, the value of old bonds may decrease
Limited early withdrawal facility
Moderate-risk FD options
4. High dividend-yielding stocks
If you want to earn regular income by taking a little risk, then investing in dividend-paying blue-chip stocks can be a good option.
What are the advantages?
Income from regular dividends
Capital appreciation is possible if the stock price rises
Blue-chip companies provide stability
What are the disadvantages?
A fall in the stock market will affect the stock price
Dividends are not guaranteed
Stocks need to be chosen carefully
5. Gold Investments (ETFs, Gold Bonds, Physical Gold)
Gold has always been considered the most reliable way to protect against inflation. You can invest in physical gold, gold ETFs or sovereign gold bonds (SGB).
What are the advantages?
Excellent way to protect against inflation
No hassle of storage in gold ETFs and bonds
High liquidity (can be sold anytime)
What are the disadvantages?
Does not give regular income
Problem of storage and security of physical gold
Gold prices may fluctuate
Slightly higher risk but good return options
6. Annuity Plans (Pension Schemes)
If you are planning for retirement and want a guaranteed income for life, then annuity plans can be the right choice.
What are the advantages?
Guaranteed income for life or a fixed period
Safe investment
Excellent option for pension planning
What are the disadvantages?
Liquidity becomes very low once the money is invested
Ability to beat inflation is limited
Some plans may charge higher fees
7. SWP in Mutual Funds (Systematic Withdrawal Plan)
If you want regular income like FD but want to beat inflation along with tax savings, then the SWP option of mutual funds can be the best.
What are the advantages?
More tax-effective than FDs
Ability to beat inflation
Withdrawal facility (you can decide when and how much to withdraw)
What are the disadvantages?
Market downturns will affect investments
Choosing the right fund is important
Not right for ultra-conservative investors
Know more about ‘Fixed Deposits’:
FDs may be a safe investment, but their interest rates do not beat inflation. If you want better returns with less risk, then post office schemes and government bonds can be good options. On the other hand, gold, and mutual fund SWPs can prove to be better for higher returns. Invest according to your goals and risk appetite to put your money in the right place. By adopting the right strategy, you can earn even higher returns than FDs.
