The pandemic scenario was a wake-up call for many people who never realised the importance of investments in life. Investments are required in the long term to secure your financial future. There are different types of investors, that is those who can afford higher risk, moderate risk and low risk in investments.

The general assumption in India is that investment instruments having a low-risk profile are very few. However, financial institutions offer various investment instruments to provide guaranteed¹ returns to the investors, which are relatively safe and secure. Insurers also provide savings solutions such as endowment life insurance for savings needs.

The choice of the best option will be based on the financial status of the investors, family commitments and other long-term financial needs. Here are five financial instruments available in India for an investor with relatively lower risk profile.

1. Fixed Deposits offered by Scheduled Commercial Banks: A fixed deposit is a financial instrument wherein investors deposit their funds for a specific duration to receive a higher interest rate than a regular savings account. The interest rate remains constant throughout the deposit term and is usually considered a safe investment option. On maturity, the banks return the principal amount invested and the interest amount earned.
   
   Fixed deposits offered by Scheduled Commercial Banks are usually considered a safe option for a relatively risk-averse investors. There are various flexible features that financial institutions offer for the benefit of investors. For example, if you prefer regular income, you can use the monthly payout or quarterly payout option. With the power of compounding, you can earn interest on the principal amount and the interest earned periodically. Banks also allow you to avail of loans against the deposit in case of an emergency.
   
   

2. Government Bonds: Government bonds are one of the safest financial instruments for short-term and long-term benefits. When the government is involved in a new investment or when the expenditure increases beyond revenues mobilised , the government issues G-Secs or government bonds to raise public funds.
   
   The government bonds are of two types-the dated securities and the Treasury Bills. The Treasury Bills have a short term tenure of less than a year, and the dated securities have a long term tenure.
   
   The issuance of these instruments is managed by the RBI and the interest rate remains fixed throughout the term. As the government guarantees¹ the returns, it is a safe and secure investment for investors planning to diversify the portfolio when other asset classes fluctuate in prices.
   
   

3. Endowment Plans: Life insurance is an important aspect of financial planning that you must consider if you are an earning member of the family. The plan will ensure a sum assured to your nominee if you meet with an unexpected demise. Insurers have modified life insurance plans to provide dual benefits, insurance and savings. It is called endowment life insurance and assures death benefit and maturity benefit.
   
   There are different types of endowment policies in India. One of the prominent plans is the guaranteed¹ return insurance plan. So, this savings insurance plan will provide life cover and additionally guaranteed¹ returns. The guaranteed¹ returns are assured during policy inception and therefore life insurance with guaranteed¹ returns are considered a safe and secure investment in India.
   
   Tata AIA Life Insurance offers a range of savings insurance solutions with varied, flexible features. For example, you can pay the premium amount for the policy monthly, quarterly, half-yearly or annually. Tata AIA online premium can be paid hassle-free on the official website. It also provides different payout options such as receiving the maturity benefit as a lump sum amount, a combination of lump sum and regular annual income, or regular monthly income.
   
   If you are looking to accomplish a long-term goal, you can take the lump sum amount, and if you are focusing on a retirement plan, you can take the guaranteed income insurance plan. Also, for the regular income option, you can choose the income period for a certain number of years or until death based on your requirements.
   
   

4. Mutual Funds: If you are looking for market-related returns but do not have the expertise to handle the financial market and cannot take up higher risks, then mutual funds are a relatively safer option.
   
   An Asset Management Company will manage your funds. You can also invest a small amount regularly on such products using the Systematic Investment Plan.
   
   

5. Post Office Schemes: The Post Offices in India facilitate a few savings schemes.

These schemes give an assured reasonable return in the long term.

Conclusion

Savings and investment solutions are an important part of your financial plan. But, it has to be chosen with complete research based on your financial status and goals in the short or long term. If you are a risk-averse investor, there are different options in India. And, if you are looking for life insurance returns as a savings solution to protect your family's financial security, then the guaranteed¹ return insurance plan is one of the endowment policy. So, understand your requirements, choose the best investment option and stay invested for maximum benefits in the longer term!

L&C/Advt/2021/Oct/1756