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What Are Some Safe Investment Options With Returns Better Than FDs?

Sep 30, 2018 | 2 years ago | Read Time: 4 minutes | By iKnowledge Team

Since time immemorial, fixed deposits have been considered the safest investment instruments. Unfortunately, it no longer offers high returns owing to the decline in interest rates in the last few years.

What Are Some Safe Investment Options With Returns Better Than FDs? - Aegon Life

In 2017, Indians invested Rs 8 lac crore in equities and Rs 3.4 lakh crore towards fixed deposits, a report[1] suggested. With this, the total stock of investment in equities in 2017 in India stood at Rs 37.6 lakh crore, while FDs stood at Rs 40.1 lakh crore. In 2016, the gap between the two was significant at a whopping Rs 7 lakh crore.[1] That margin has now reduced, showing that Indians are gradually becoming more receptive to other forms of investment.

There is no dearth of investment options today that offer high returns based on your risk appetite. Therefore, you do not need to panic when interest rates witness a decline, since there exist a range of alternatives that one can consider for long-term gains.

Here’s a lowdown on some safe investment options:

  • Debt Funds

Debt funds are a type of mutual fund that generate returns when you invest your money in fixed income securities, including Treasury Bills, corporate bonds and government bonds, among other options. These kinds of funds are similar in nature to Fixed Deposits, but only in terms of the risk involved. Here, you get a steady income after the maturity period, basis the duration you choose.

In comparison to Fixed Deposits that come with a pre-determined interest rate, Debt Funds are dependent on how the market performs and this allows one to earn higher returns in the form of capital appreciation plus interest.

Coming to the tax scenario, short-term debt fund gains (with maturity period between 1 to 3 years) are added to your income and taxed according to the applicable slabs. In case of long-term gains (where average maturity is about seven years), they are taxed at 20% after indexation benefits.

  • Equity Mutual Funds

Equity Mutual Funds are those where more than 65% of the assets are invested in equity markets, while the rest are in government bonds, corporate bonds and other securities. These funds invest primarily into stocks of companies and are directly proportional to how the markets perform. This means that when the market is bullish, the Net Asset Value (NAV) of the funds rises, while it declines when the market doesn’t perform well. Most people for this reason consider these as high-risk funds.

Coming to the tax regime, these funds enjoy certain benefits. There is no incidence of long-term capital gains tax on equity shares or funds, which are held for at least a year from the date of acquisition.

Equity mutual funds are generally categorised according to company size, investment style and geography. The size is generally dependent on market capitalization, while the style is reflected in the fund’s stock holdings.

While equity mutual funds have exposure to the market and its ups and downs, you can create a conservative equity mutual fund portfolio by picking funds that prioritise capital conversion. Certain funds focus on relatively low risk such as specific sectors that see lower volatility or large cap stocks with a relatively lower downside risk. That said, equity mutual funds are not as safe as Fixed Deposits, but they can be a valuable part of your overall financial portfolio.


Unit Linked Insurance Plans (ULIPs) serve dual benefits of insurance with investment. When you invest in a ULIP, there’s a possibility of higher returns along with protection. There are certain charges that are levied, but you have the option to pay over the entire tenure. Several companies have an allocation charge that is deducted directly from the premium and is generally levied in the beginning itself.  With iMaximize, a plan offered by Aegon Life, there is zero allocation fee charge, which means there’s more capital available for investment.

When it comes to ULIPs, you can decide where you want to put your money after analysing your investment goals as well as the performance of the market. You have the freedom to transfer your investments between equity, debt and balanced funds.

As a policyholder, a certain premium is paid on a monthly or annual basis depending upon the type of ULIP. A small amount is allocated for administrative and mortality charges of the policy and the rest is then invested in your choice of fund, which is based on your risk appetite. Apart from death and maturity benefits, there is also a partial withdrawal advantage, where you can redeem some of your units based on your need.

In terms of tax benefits, one is eligible to claim tax deductions of up to Rs 1.5 lac on premiums paid towards ULIPs. Also, the returns you generate are also tax-free.

  • Public Provident Fund

Since time immemorial, Public Provident Fund (PPF), 1968 has been the preferred saving scheme for several investors and still finds favour among them. This is primarily because the principal and the interest earned have a sovereign guarantee and of course, the returns are exempt from tax.

Currently, PPF offers 7.6% annually, so for someone who must pay 30.9% tax under the highest income slab, it turns out to be nearly 11.04% in pre-tax return. This is one of the rare tax-saving instruments that offers such great pre-tax return! The PPF contributions you make annually qualify for tax deductions under Section 80C of the Income Tax Act, 1961.

One can either open a PPF account in his name or the name of a minor who he is the guardian of. The minimum amount to be kept in the account is Rs 500, while the maximum that can be deposited in a year is Rs 1.5 lakh.

The lock-in period for a PPF account is 15 years, which can then be extended in a block of five years. You can either open such a type of account in a designated post office or bank branch. Some private banks also offer this facility.

Though FDs have been the conventional option of investment for years, the above-mentioned options offer high returns. Now that you know about each of them in detail, think wisely and go for something that suits your needs!

To know about AegonLife’s saving plans and other products like ULIPs, visit our home page.

II/Sep 2018/4417


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