Which Low-Risk Investment Option you Should Opt for: Bonds or Fixed Deposits?

| September 7, 2017

Low-Risk InvestmentA Savings account has always been a traditional way to save funds. Savings is a habit which has been inculcated in us since our childhood. But parking your funds in savings account won’t replicate it. If you want to earn higher returns over your funds then investing it is mandatory.

When talking about investments, there are many people who might hesitate to invest their hard-earned money as investments are risky. If you plan your low-risk investment carefully then, you will learn that they are not that risky as they seem to be. Investments are of two types and depending upon your choices you can choose your investment Plans.

In case if you want to earn higher returns on your investments and are ok with risks, then you can opt for high-risk investments. On the other hand, if you are new to the investment market and are not ready to take the risk than low-risk investments are just for you.

Low-Risk Investment

Mutual funds, shares and investment in gold are some of the options which involve high risk. Whereas low-risk investments are concerned, fixed deposit and bonds which are said to be safer and most preferred investment option.

If you do not want to take any risks then a low-risk investment will be ideal for you. In case if you are new to the investment market you might surely get confused as to which option is better. Here are some things that can help you decide which option will be better for you:

Investments in Bonds

There are many companies who offer bonds or Non-Convertible Debentures (NCD) in order to attract investors. As bonds involve low risk, there are many investors who are looking forward to investing in bonds.

It is necessary to keep in mind that the returns offered on NCD are low. One can invest in bonds as they involve low risk, but it is essential that you remember that bonds also offer low returns.

You need to remember that investments in bonds will offer you a fixed rate of interest till its maturity. As the bonds are not depended upon the market conditions, they are less volatile. This makes investors keen towards bond investments.

Fixed Deposit

When talking about Fixed Deposits (FD), it is the most preferred investment option in India. Although Fixed Deposits involve low risk, they still offer their investors with higher returns compared to a Savings account.

This makes FD is more preferable than parking funds in a Savings account. The interest rate is the most important factor when it comes to investments. It is important to know that the interest offered by different financial institutions varies from each other.

You might come across a financial institution which offers you a high rate of interest, whereas, another financial institution is offering you with a low interest rate on the same amount. Thus, it gets significant to check the interest rates before opting for a Fixed Deposit.

Apart from the Fixed Deposits offering a high rate of interest, it also benefits its investors with different schemes. Fixed Deposits also provide its investors with an insurance worth INR 1 lakh for the amount they have invested.

This provides a security to the funds that are invested in Fixed Deposits. Fixed Deposit also provides you with an overdraft facility, which allows you to withdraw up to 90% of the funds from your FD account.

By using this facility, you can monetize your financial crises and you don’t need to break your FD in order to withdraw funds.

As mentioned above, investing in bonds will definitely make you indulge in low-risk investment but at the same time, it will also offer you low returns. It is ideal to invest in Fixed Deposits than bonds as Fixed Deposits provide higher returns over your investments.


Category: Investing

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