Bank fixed deposits are the most common way of saving money. However, they have a drawback. They offer a fixed rate of return over a period of time and don’t give you the freedom to invest in mutual funds and other financial instruments. To choose the right investment with lucrative interest rates, you must perform risk assessment and find out if it can help you reach your financial goals.
With this in mind, we’ve compiled a list of 8 investment options that can give you better returns than bank fixed deposits.
1. Stock-bond mutual funds
These are an investment option which is popular among investors who want to make more money than bank fixed deposits but don’t want to compromise on their long-term savings goals. They typically offer higher returns than bank fixed deposits because they allow you to take advantage of stock market growth without having to worry about the vagaries of interest rates. Mutual funds offer investors the ability to diversify their portfolios by investing in several companies at once, which reduces risk and increases long-term returns.
2. Debt mutual funds
These are similar to equity mutual funds except that they invest in debt instruments like bonds or debentures instead of stocks. This makes them suitable for investors who want to make more money than bank fixed deposits but don’t want to compromise on their long-term savings goals.
3. Term deposits
Term deposits offer fixed returns for a specific period of time, usually between 1-5 years. You can choose from a range of term deposit options like SBI Term Deposit or ICICI Term Deposits or any other term deposit provider. The advantage of term deposits is that they have low risk and high liquidity which helps in getting good returns over long periods of time.
4. Equity Funds
Equity funds come with higher risks but they also offer more potential rewards when compared to fixed deposits, especially if you select a fund that focuses on small and midcap stocks. Equity funds also come with tax benefits where the capital gains earned on securities held in such funds are not taxed at the final year’s level but at an earlier stage in your tax bracket (10%).
5. Debt Funds
Debt funds also have their own unique set of risks and rewards, which can vary from fund to fund depending on its composition. Debt funds offer better returns than fixed deposits but they also come with higher risks due to the fact that they invest in corporate bonds, government bonds and bank loans. While debt funds offer higher returns than fixed deposits, they also carry more risks as compared to other investment options like equities or mutual funds; so before investing in these types of instruments you must make sure to understand their risks thoroughly.
Most investors prefer bonds over other investment options since they are considered as stable investments which offer high returns during good times and also protect them from market fluctuations during bad times. While bonds can be easily purchased by retail investors, they require some knowledge about bonds as well as thorough analysis before investing in them due to their risk profile. However, if you are looking forward to earning better than bank fixed deposit returns then bonds are definitely one option worth considering.
7. Fixed Deposits
Fixed deposits are one of the safest investment options as they offer good returns over a long period of time. Their return varies depending upon the interest rates they attract per month, and how long it takes to mature. The returns also vary depending on whether or not you opt for a term deposit or a non-term deposit option. Choose between term deposit and non-term deposit options depending on your financial goals and risk assessment report.
8. Mutual Fund
Mutual funds are an easy way to invest in a stock market or other asset class. You can also enjoy higher returns than fixed deposits as mutual funds have low expenses and also attract tax benefits as well as other perks including freebies and bonuses etc., which make them even more enticing than fixed deposits. However, mutual funds have limitations such as they don’t offer tax benefits like equity funds do since they don’t offer any tax benefits for investors, unlike regular investments (like fixed deposits). They also require careful research before investing so that you don’t end up losing your investment.
The returns on fixed deposit accounts have come down to around 4-5% currently. At a time when the inflation is running higher, fixed deposit rates are still low. Now is the right time to look outside the system for higher fixed deposit returns. As an investor you can choose one or more of the above investment options to earn better than bank fixed deposit returns.