The days when people had to rely only on their savings for financial security are long gone. Today, savings alone cannot ensure safety. Keeping your hard-earned money idle in a bank account is nothing but a lost opportunity. You need to make your money work for you. Investing is the way you do it. You must allocate your funds to different financial instruments to earn good returns in the long run.

But the question is—where to invest? There are 5 investment products that are relatively safe and preferred by many investors. They are—Fixed Deposits (FDs), Recurring Deposits (RDs), Mutual Funds, Unit Linked Insurance Plans (ULIPs), and Guaranteed Savings plans. In this article, we will discuss each of these investment options.

Fixed Deposit (FD)

A fixed deposit is an investment option offered by banks and other financial institutions, where you need to deposit money for a pre-determined period of time. The funds earn a certain interest on the principal amount. The most significant advantage of investing in an FD is guaranteed returns and the safety of your money. Here are some of the features and benefits of opening a fixed deposit account: –

• It offers guaranteed returns as it remains unaffected by the fluctuation in the markets.
• The investor has the flexibility to choose the investment tenure.
• It is a safe and secure investment option.
• FD investors are eligible to take loans against their FD accounts. 

  Recurring Deposit (RD)

RD is an investment tool that allows individuals to make regular deposits and earn good returns on their investments. With this investment plan, you can invest a small amount every month at your convenience and receive guaranteed returns. Just like fixed deposits, recurring deposits provide security to your savings. Some of the key features of RD are: –

• It aims at developing a habit of investing.
• You can start investing with an amount as low as Rs. 1000.
• The investment tenure can range from 6 months to 10 years. 

  Mutual Funds

A mutual fund is a type of investment where the money from different investors is pooled together to buy bonds, stock and other market-linked securities. By investing in different funds, this financial instrument takes advantage of portfolio diversification that helps balance the risks and returns. Mutual fund investments can give inflation-beating returns. Here are some of the benefits of investing in mutual funds: –

• They are extremely liquid as the funds can be redeemed at any point.
• Helps in the diversification of the financial portfolio.
• It is managed by experts who know where and how to invest.
• They are safe and transparent. 

  Unit Liked Insurance Plan (ULIP)

ULIP is a unique plan that offers dual benefits. It basically combines life insurance and investment. A part of the premium paid is used to provide life coverage, and the rest is pooled with the money received from other investors and then put into financial instruments such as equity and debts. The returns made can be inflation-beating. Some of the key features of a ULIP plan are: –

• Offers market-linked returns.
• It gives investors the flexibility to switch between funds.
• You can avail of tax deductions under section 80C. 

  Guaranteed Savings Plan

A guaranteed saving plan is usually designed to achieve long-term financial objectives. It offers guaranteed returns to the investors along with the life cover. Here are some of the key advantages of investing in this plan: –

• A chance to get regular income.
• Achieve your long-term financial goals.
• You can avail of tax benefits under section 80C and section 10(10D)

Comparison of the 5 Top Investment Options in India

Investors in India are spoilt for choice when it comes to choosing where to invest their hard-earned money to get the benefits such as tax savings, guaranteed returns or high returns. But not all investments can provide all the benefits that an investor seeks. To help prospective investors make an informed investment decision, the below table compares 4 leading investment options in India namely – Unit Linked Insurance Plan (ULIP), Guaranteed Savings Plan, Fixed Deposits, Mutual Funds and Recurring Deposits: 

As you can see, each of these investment options come with their own benefits and limitations. So, no single investment can cater to the needs of every prospective investor. Using the details in the above table you can easily compare and choose which of these investment options is ideally suited to your requirement.

Which is the Right Investment Option for You? 

All the investment options we have discussed may not suit everyone the same way. So, which one should you go for? To answer that question, you first need to understand your requirements and what you hope to achieve by investing. Make sure to know how much you can risk. 

Financial experts would suggest that you should go for FD or RD if you are a conservative investor who is seeking guaranteed returns with minimal hassles. It may be a perfect choice for retired individuals or people who are close to their retirement. Or, if you are seeking assured returns along with tax benefits, Guaranteed Savings Plan can be a good choice.

ULP is a great financial instrument if you have a moderate risk appetite and want to make good returns along with a life cover. Go for mutual funds if you are willing to take risks. You can generate a large corpus with mutual funds that can help beat the inflation.

Author Bio: Vinod Gill is a writer who specializes in writing content on Finance and Banking subjects. He is a Digital Marketing Consultant, Blogger, and Co-Founder of Ecompany