Want better return than FDs? These 7 great options can be the right bet!

With the RBI slashing the repo rate for the first time in 5 years, many banks, including public sector ones, have revised their interest rates on fixed deposits (FDs). FD customers, especially senior citizens, have enjoyed high interest rates on their FD investments for the past many years amid a high interest regime in the country. But since banks have started revising downwards their FD rates, many investors would be now thinking about exploring other investment avenues to get better returns.

If you are looking for better returns than fixed deposits (FDs), then you have many great options. FD gives security and fixed interest, but its interest rates often fail to beat inflation. This is why investors now need such options that give better returns and also keep the risk balanced.

In this story, we will explore 7 best options of FDs, which are divided according to your risk-taking capacity. Whether you want a completely safe investment or are ready to earn more returns by taking a little risk, this write-up will guide and help you make the right decision.

Also read: Stock market crash: Rs 94 lakh crore gone! What should mutual fund investors do now?

1 Savings accounts in small finance banks

If you want to get better interest rates than FDs and maintain full liquidity, then savings accounts in small finance banks can be a good option. These banks offer interest up to 7%, which is much higher than traditional banks.

Benefits:

-Better interest rates (up to 7%) than FDs

-Instant access to funds (no lock-in)

-Insurance protection up to Rs 5 lakh (by DICGC)

Disadvantages:

-Interest rates may change from time to time

-Some banks have a minimum balance requirement

-Can be difficult to beat inflation

2 Post Office Savings Schemes

If you want complete safety and government guarantee, then post office NSC (National Savings Certificate) and PPF (Public Provident Fund) can be the best options.

Benefits:

-Safe investment with government guarantee

-Tax savings under Section 80C

-Higher returns due to compounding benefits

Disadvantages:

-Long lock-in period (PPF – 15 years, NSC – 5 years)

-Interest rates may change every quarter

-Not all schemes can fight inflation

3 Government Bonds and RBI Bonds

If you want better interest than FD with complete safety, then government bonds and RBI bonds are the right choice. They give stable returns for a long period.

Benefits:

-Safe investment with government guarantee

-Better interest rate than FD

-Tax exemption in some bonds

Disadvantages:

-Long lock-in period

-If interest rates rise in the market, the value of old bonds may decrease

-Limited early withdrawal facility

-Moderate-risk FD options

4 High dividend-yielding stocks

If you want to earn regular income by taking a little risk, then investing in dividend-paying blue-chip stocks can be a good option.

Advantages:

-Income from regular dividends

-Capital appreciation is possible if the stock price rises

-Blue-chip companies provide stability

Disadvantages:

-A fall in the stock market will affect the stock price

-Dividends are not guaranteed

-Stocks need to be chosen carefully

5 Gold Investments (ETFs, Gold Bonds, Physical Gold)

Gold has always been considered the most reliable way to protect against inflation. You can invest in physical gold, gold ETFs or sovereign gold bonds (SGB).

Benefits:

-Excellent way to protect against inflation

-No hassle of storage in gold ETFs and bonds

-High liquidity (can be sold anytime)

Disadvantages:

-Does not give regular income

-Problem of storage and security of physical gold

-Gold prices may fluctuate

-Slightly higher risk but good return options

Also read: Income Tax Department investigating unlisted share transactions, tax evasion in OFS deals: Report

6 Annuity Plans (Pension Schemes)

If you are planning for retirement and want a guaranteed income for life, then annuity plans can be the right choice.

Benefits:

-Guaranteed income for life or a fixed period

-Safe investment

-Excellent option for pension planning

Disadvantages:

-Liquidity becomes very low once the money is invested

-Ability to beat inflation is limited

-Some plans may charge higher fees

7 SWP in Mutual Funds (Systematic Withdrawal Plan)

If you want regular income like FD but want to beat inflation along with tax savings, then the SWP option of mutual funds can be the best.

Benefits:

-More tax-effective than FDs

-Ability to beat inflation

-Withdrawal facility (you can decide when and how much to withdraw)

Disadvantages:

-Market downturns will affect investments

-Choosing the right fund is important

-Not right for ultra-conservative investors

Conclusion:

FDs may be a safe investment, but their interest rates do not beat inflation. If you want better returns with less risk, then post office schemes and government bonds can be good options. On the other hand, gold, and mutual fund SWPs can prove to be better for higher returns.

Invest according to your goals and risk appetite to put your money in the right place. By adopting the right strategy, you can earn even higher returns than FDs.