When it comes to investments, a large number of people look for safe or risk-free investments that guarantee capital protection. A safe investment is one that has little or zero risks. It's ideally suited for investors who are more concerned about the safety of their finances, rather than capital growth.

Here, in this guide, we list out the best risk-free investments in India to safely park your funds. 

6 Best Risk-free Investments to Safely Park your Funds 

The investment options listed here are ideal for retirees and conservative investors who cannot afford risks. When you park your funds in low-risk investments, you don't have to worry about the fluctuations of the market. The returns from these funds are generally guaranteed.

  1. Savings Account offered by Banks 

All commercial banks offer savings accounts for customers to park their hard-earned money. While a savings account is a necessity to manage your finances like for shopping online, using a credit card/debit card, paying utility bills, it's not the best option as an investment. This is because the returns generated from a savings bank is usually around 4% per annum.

However, if you're looking to park your money and make frequent withdrawals safely, then a savings account is the ideal choice.

Pro Tip: While choosing a savings account, compare the interest rates of different banks and choose a savings account that offers higher interest rates. 

  1. Fixed Deposits (FD)

Fixed deposits are undoubtedly the most popular investment option for Indians. For decades, it was the go-to investment option for families looking to park their surplus funds securely. Fixed deposits are offered at all banks and offer guaranteed returns on maturity. It's risk-free, and you know the amount you receive on the maturity of the deposit.

Fixed deposits can be opened for tenures ranging from one month to ten years or more, depending on the bank that offers it. The interest rates start from 6% and go up to 8.35% depending on the type of fixed deposit, amount invested and tenure. 

Most banks offer several types of fixed deposits like:

  • Standard fixed deposits with a fixed tenure

  • Cumulative fixed deposits 

  • Non-cumulative fixed deposits 

  • Senior citizen fixed deposits 

  • Tax-saving fixed deposits 

Premature withdrawal is allowed on most fixed deposits. However, you may have to pay a small early withdrawal fee or forfeit the interest earned for a particular period, when you withdraw it before maturity. Also, you can get credit cards and loans against fixed deposits. 

Pro Tip: Make sure to check the different types of fixed deposits and choose the right one that best suits your investment goals. 

  1. Recurring Deposits (RD)

A recurring deposit is similar to a fixed deposit. However, in an FD, the investment is made as a single deposit. In an FD, the investment is made as fixed amounts at regular intervals – say once every month.

Like an FD, recurring deposits offer guaranteed returns. The interest rate is fixed and does not change for the entire tenure. The interest rate ranges from 5.9% to 8.0% depending on the bank, the amount invested and tenure. Generally, premature withdrawals are not allowed in a recurring deposit. However, nowadays, several banks offer early withdrawal by levying a penalty.

Pro Tip: Certain banks offer flexible recurring deposits where you can invest any amount any number of times in a month. Opt for flexible recurring deposits as it provides more leeway in the number of investments you can make, every month.

  1. Public Provident Fund (PPF) 

PPF is one of the most popular saving options in India since it offers guaranteed returns and tax exemptions. It's a scheme provided by the government of India to help individuals save for their retirement. The PPF can be opened at a post-office or banks.

The tenure of PPF is 15 years, and it can be extended further if required. The maximum number of investments permitted in a year is twelve and the maximum amount that can be deposited in a financial year is Rs. 1.5 lakhs. The amount invested in PPF is tax-exempted under Section 80C of the ITA. The interest rate offered ranges from 7% to 8.9%.

Premature withdrawals from the PPF account is permitted after five years of opening the account, for specific requirements. 

Pro Tip: If you are looking for a safe investment option that offers tax savings, then PPF is an excellent choice. 

  1. Post Office Savings Schemes 

The Department of Post, India offers several savings schemes to help individuals grow their wealth, and inculcate the habit of savings. Generally speaking, the returns from post office schemes are higher when compared to banks and other NBFCs. 

Some of the popular post office savings schemes include:

  • Savings account – 4%

  • Sukanya Samriddhi Scheme – 8.1%

  • 15-year public provident fund – 7.9%

  • 5-year recurring deposit – 6.9%

  • Monthly income scheme – 7.6% 

  • Kisan Vikas Patra – 7.3% 

  • Senior citizen saving scheme – 8.3% 

  • National savings certificate – 7.6%

One of the reasons why several people do not opt for post office savings schemes is that it doesn't offer online investments and tracking. You have to visit your nearest post office to start any of these schemes. However, with digitisation happening in all industries, one can expect the postal department to start offering these schemes online as well.

  1. Non-equity Mutual Funds 

Non-equity mutual fund schemes like debt and GILT schemes offer capital protection and carry less risk. These mutual funds invest in secure products like debentures, government bonds, gold bonds, commercial papers and fixed securities. The investment horizon is short, mid or long-term, depending on the type of fund chosen and your investment objectives.

Since these are mutual fund investments, it's not possible to guarantee 100% risk-free investments. However, the associated risks are far lower than those of equity-oriented funds.

Pro Tip: Use a mutual fund risk-o-meter to help you choose the right non-equity mutual funds that have low risks. 

S.No. Investment Type Risk Level Investment Amount Tenure Rate of Interest
1 Savings Accounts Very low risk Starts from Rs. 100 depending on the bank Not applicable 4% upwards
2 Fixed Deposits Low risk Starts from Rs. 1000 depending on the bank 1 month to 10 years 6% to 8.35%
3 Recurring Deposits Low Risk Starts from Rs. 1000 depending on the bank 6 months to 10 years 6% to 8.35%
4 Public Provident Fund Low Risk Rs. 500 per year 15 years 7.90%
5 Post Office Schemes Very Low Risk Starts from as low as Rs. 100 Depends on the savings scheme chosen 4% to 8.3%
6 Non-equity Mutual Funds Low to Moderate Risk Starts from Rs. 500 per month Depends on your investment horizon 4.9% to 7.0%


Consider the Risk-Return Trade-off before Investing 

The biggest drawback of investing in low-risk investments is that you are likely to see only modest or low returns in the long-run. Inflation also erodes the small profits you gain from these investments. The risk-free investments mentioned here are ideal if your goal is to preserve your capital. However, if you're looking to build your wealth, then consider opting for other investment products that match your long-term goals.

While it's true that low-risk investments do not generate high returns, it doesn't mean your returns are zero. The safe investment options listed here offer you modest gains while providing tax benefits, as well. So, make sure to compare the features of the investments mentioned here and pick the ones that work best for you.