Best Low Risk Investments for High Return

Most people think of investing as buying stocks or mutual funds. In today’s financial world, investors are bombardments with all sorts of schemes, plans and other offers to give you good returns for your money. There is a humongous choice for investors in the form of Mutual Funds, Fixed Deposits, Shares, Insurance and more. Not everyone is a financial wizard, so it becomes a daunting task for the people with little or no knowledge to get into investment as a means to build wealth for themselves.

There are few investment plans with high returns available for people who want to invest in low risk fund. The truth of the matter is that under this category, the choices are limited. However, here are some of the best options we have mentioned which fit the bill.

Savings Account

The universal preference for low risk investment is having a savings account. A savings account becomes a sort of a “base: where your salary is transferred to your account. The balance attracts interest, and the money is safe.

Fixed Deposits

You can make fixed deposits in the same bank for a fixed period and get a higher interest rate than your savings account. You can decide the term, and hence you can park your money in the fixed deposit plan for any period. There is also no cap on the amount of deposit you want to make.

Corporate Bonds

Corporations issue these bonds to raise funds for their operating expenses, buying or upgrading plant and machinery. It also helps for expansion of the business and other related expenses. These bonds are usually long-term investments and have a maturity of at least one year. These bonds are generally safe investments since it is promoted by reputed companies and vetted by the appropriate government agencies.

Mutual Funds

In a Mutual Fund, a large number of investors pool in their money, which is then, invested in different investment options by a professional fund manager. Here the large investor community divides the risk while the returns have been high. These are ideally long-term investments. There are various kinds of Mutual like Debt Funds, Equity funds, Hybrid Funds, Liquid Funds etc. Choose a fund that is in alignment with your investment goals.

Insurance

Insurance is another avenue for investment as well as for life cover of you and your family. Many insurance companies have (ULIP) Unit Linked Insurance Policies that set aside one portion for the actual life cover and the other portion for investment. Here again, a fund manager manages the investment portion collected by the insurance company.

Risks in an Investment

Many investors make investment by assuming that a particular investment is “safe: or “risky”. In fact, every investment instrument comes with some level of risk – so classifying an investment is not so simple. Investment options with high return are generally high risk. Risks come from various sources and could be one of the following risk factors:

1. Market Risk
   Your investment can lose its value in the market – especially if your investment is in equities and secondary market.
2. Reinvestment Risk

This risk may occur when your investment is reinvested at a lower rate of interest – especially fixed-income investments

1. Political Risk
   Sometimes political turmoil in a country can lower the value of your investment. Developing countries are more prone to this kind of risk.
2. Inflation

Inflation can lower your purchasing power and the value of your investment.

1. Legislative Risk

This is a risk that can happen when new legislations in the finance sector take place and negatively affects investments.

1. Tax Risk
   One of the main risk to your investments is the applicable taxes. This can eat into your returns and lower the value of your investment. Apart from tax-free investment option, all investments are subject to this risk.

Last Word Before You Take the Investment Plunge

Investment processes can be lengthy, complicated and full of jargon that many of us do not understand. Therefore, before you put your hard-earned money in an investment instrument, you need to gauge the risk attached to it. If you are from a “non-financial” background and have very little knowledge about investing, then it is better to approach a reputed and honest chartered account or a CFA (Certified Financial Advisor) who will plan out your investments so that you not only get good returns you can also save on taxes as well.

It would be a good idea to do some research on your own. Find out what experts say about the various investment options and pick up tips from them. At first, it may seem like confounding. Later on, you may begin to understand the lingo and jargon. Good luck with your investment adventure.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.