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FD Alternative | Alternatives to Fixed Deposit in India
- Fixed Deposits (FDs) are traditionally viewed as one of the safest forms of investment an individual can pursue. In this article, we will discuss some FD Alternative
- However, the recent trend of declining interest rates on term deposits across various banks has left many prospective investors questioning whether to continue channelling their funds into FDs or to explore alternative avenues.
- While the market currently presents several financial investment opportunities with promising returns, it’s important to remember that these options often come with their own set of risks.
- Therefore, it is crucial for investors to thoroughly review all terms and conditions before making a decision on where to allocate their hard-earned money.
Best FD Alternative Options
We take a look at some other options that are available to investors which can be considered.
Potential investors might explore options such as
1. Real estate structured debt
2. Debt Mutual Funds,
3. Corporate Deposits,
4. Small Savings Schemes, and
5. Government Bonds
6. Fixed Maturity Plans
Each of these can yield respectable returns on the investments made and are alternatives to fixed deposit in India
Here, we examine the above-mentioned financial products more closely to see whether they are viable for potential investors.
Top FD Alternative Options
1. Real estate structured debt
It stands out as an excellent short-term investment choice in India and an alternative to fixed deposit. It delivers steady income opportunities backed by property assets as collateral. It is recognised as one of the superior short-term investment avenues, known for its strong potential for substantial returns in the country.
Platforms like Assetmonk allow investors to get involved with a minimum commitment term of 36 months.
This investment method is particularly beneficial for senior citizens in India, as it offers a regular monthly income through fixed returns. Additionally, it serves as one of India’s top short-term investment options for saving on taxes.
2. Debt Mutual Funds
These funds aim to deliver fixed returns to investors by placing their capital in corporate bonds, government securities, and similar instruments. While they carry lower risk compared to many other mutual funds, they are not entirely devoid of risk. A key advantage of debt mutual funds is that they often provide returns equal to or higher than the amounts invested despite market involvement. They are a suitable option for investors ready to accept some level of risk, with average returns of 6.1% over one year and 7.1% over three years reported.
3. Corporate Deposits
Despite a drop in interest rates, corporate deposits present an appealing alternative to fixed deposits due to slightly better interest rates. Like fixed deposits, these involve investing in prestigious companies, offering similar tenure and interest payout options. However, they come with associated risks, making thoroughly researching a company’s performance essential to ensure a fruitful investment.
4. Small Savings Schemes
Options like Public Provident Funds (PPFs) and National Savings Certificates (NSC) offer more attractive returns, especially when FD interest rates are falling. PPFs are particularly appealing due to their tax-exempt status. While NSCs do incur tax and come with a lock-in period, they generally provide better returns owing to higher interest rates compared to current FD rates.
5. Government Bonds
These bonds are a favored choice after fixed deposits for many investors. Despite the cautious approach investors take due to their long-term commitment and lack of user-friendliness, government bonds usually offer reliable returns. While not exceedingly high, the returns ensure the initial investment is worthwhile.
6. Fixed Maturity Plans (FMPs) –
Closely resembling debt mutual funds in their investment in debt instruments, FMPs distinguish themselves by aligning investments with instruments that mature concurrently with the FMP. While they offer higher returns compared to FDs, investors must note the inability to withdraw funds before the investment’s maturity date.
Factors to Consider While Investing in Options Other Than FDs in India
Investing in options other than fixed deposits (FDs) in India involves considering a range of factors to ensure you make informed decisions that align with your financial goals, risk tolerance, and investment horizon. Here are some key factors to consider:
Risk Tolerance:
Assess your ability and willingness to take on risk. Different investments carry varying levels of risk, and understanding your risk tolerance is crucial in choosing the right options.
Investment Horizon
Determine your investment time frame. Long-term investments might allow for more risk and potentially higher returns, while short-term investments might require more conservative options.
Financial Goals:
Define your financial objectives, whether it’s wealth accumulation, income generation, capital preservation, or retirement planning. Your goals will guide your investment choices.
Liquidity Needs:
Consider the liquidity of the investment. Some investments might lock in your money for a specific period, while others offer more flexibility in accessing funds.
Diversification:
Diversify your portfolio to spread risk across different asset classes. A well-diversified portfolio can help manage risk and improve potential returns.
Tax Implications:
Understand the tax treatment of different investments. Some options might offer tax benefits under sections like 80C, while others may have different tax implications on interest, dividends, or capital gains.
Market Conditions:
Analyze current market conditions and economic indicators. Market trends and economic factors can influence the performance of various investment options.
Inflation:
Consider the impact of inflation on your investments. Opt for investments that can potentially outpace inflation to preserve the purchasing power of your money.
Regulatory Environment:
Stay informed about the regulatory environment affecting investments in India. Changes in regulations can impact the performance and attractiveness of certain investment options.
Professional Advice:
Seek advice from financial advisors or investment professionals. They can provide personalized recommendations based on your financial situation and goals.
Bottom Line
While the previously mentioned investment options are viable, they do not offer the same level of safety or benefits associated with term deposits. Those interested in exploring financial alternatives to fixed deposits might consider these opportunities, as they generally provide slightly higher interest rates and are considered relatively safer compared to time deposits.
Assetmonk is a pioneer in alternative real estate investment, and we understand the immense potential in the Indian commercial real estate industry. We make alternative assets, such as real estate, more accessible. We have customised investment options to suit individual financial goals like passive income capital appreciation and portfolio diversification.
Our expertise is identifying opportunities with high yields within the retail, office, and industrial asset classes. This enables our investors to maximise profits while diversifying their portfolios.
We offer various alternative investment options, such as fractional or joint ownership of high-end commercial properties, sub-leasing ventures, etc. Trophy locations with the potential for high Internal Rates of Return (IRR) are prioritised, and due diligence is done to ensure these provide profitable returns for our investors.
