A bank deposit is considered the safest and most conventional option to park your savings for the future. But, with the falling interest rates, the banks are no longer the best option for your investments.
Here are few investment options that are worth considering other than a bank:
- Tax-free Bonds: Most tax-free bonds can yield a return of 7 to 9.05% and that too without paying any taxes, i.e. you do not need to pay any tax on the interest earned. These bonds can be easily bought from the secondary market and their prices are inversely proportional to the interest rates. These bonds are issued by the government institutions only, and hence are considered a safe option to invest the money.
- Debt Mutual Funds: Debt mutual funds help you to earn better returns than the bank deposits since, in the case of a debt fund, investments are made in different government securities and corporate bonds. If you opt for dividend distribution while investing in the debt fund, then the interest earned is also tax-free. The only risk investors run is with respect to interest rate fluctuations.
- Peer to Peer lending: Peer to peer lending in India is an emerging investment option that allows investors to earn a good return on their money. P2P lending allows you to advance short term loans online to the individuals who need money to fund their projects.There are various ways in which you can lend loans to minimize your risk. It also allows you to diversify your investments. The interest earned through Peer 2 Peer lending is usually higher than what the banks offer on deposits. To learn more about P2P lending, visit LenDenClub.
- Fixed Maturity Plans: They are similar to Debt mutual funds. The only difference is that FMP invest in those securities or instruments which have the same maturity as that of the FMP’s maturity. So, if the FMP is for a year, then the bonds, debentures, etc. in which investment will be made will also expire in one year. It does not allow you to withdraw the money before the maturity of the FMP so, your money is blocked for the whole duration of the plan. But, they yield better returns than the FDs in the bank.
There are many options available for investment other than a bank. However, one should consider the safety of the funds, returns and the taxation part before going ahead with any investment.