Top 5 Low Risk Investment Options [Guide for Passive Investors]

Fixed Deposits (FD)

Fixed deposits are one of the safest and most reliable types of investment. FDs allow you to invest a set amount of money for a set length of time (called lock-in or maturity period). You get a respectable rate of interest on the principal amount, which is often more than a savings account.

You can also withdraw your money along with the returns when the term ends. Investing in an FD account with a reputable financial institution may provide further advantages. Higher credibility, interest payments on a regular basis, and flexibility are just a few examples.

Money Market Funds

A money market fund is a type of mutual fund that focuses on preserving the value of your money. To diversify risk, these funds invest in liquid, low-risk securities such as CDs, commercial papers, Treasury bills (T-bills), short-term bonds, and so on.

These mutual funds are a good place to put your extra cash if you want to generate moderate but quick returns. Because market volatility has little to no effect on these schemes, your money is usually safe. You can invest in such funds with a lump-sum contribution or through a Systematic Investment Plan (SIP).

National Pension Scheme (NPS)

The National Pension Scheme is administered by the Pension Fund Regulatory and Development Authority of India (PFRDA) (NPS). NPS stands for National Pension System, and it is a long-term investment plan.

It's a combination of several instruments including corporate bonds, fixed deposits, liquid funds, and so on. You can invest in NPS through two types of accounts if you are 18-60 years old: Tier 1 and Tier 2. A minimum investment of Rs 500 is required for a Tier 1 account, but only Rs 250 is required for a Tier 2 account. The maximum investment amount is unrestricted.

It carries a low risk because it is backed by the government. However, depending on the percentages invested in debt and equity, the returns may vary.

Public Provident Fund (PPF)

A well-known government-backed initiative is the Public Provident Fund (PPF). It is one of the safest investment options because it is backed by national guarantees. It has a 15-year lock-in period and offers competitive interest rates.

Dividend Stocks

Stocks aren't as safe as cash, savings accounts, or government bonds, but they're safer than high-risk investments like options and futures. Dividend companies are thought to be safer than high-growth equities since they provide cash dividends, reducing but not eliminating volatility. As a result, dividend stocks will fluctuate with the market, but when the market is down, they may not fall as much.

Companies that pay dividends are more stable and mature, and they provide both a dividend and the chance of stock price gain.

One risk for dividend stocks is that if the firm runs into financial difficulties and declares a loss, it will be forced to reduce or abolish its payout, lowering the stock price.