Invest With Confidence: 5 Best Fixed-Income Investment Options

Introduction

Fixed-income investment options provide stable returns and protect the capital, safeguarding conservative investors from market volatility. Many are non-market-linked and, hence, unaffected by market changes.

While equity-oriented and equity-linked plans offer a higher return at a higher risk, a fixed-income investment plan offers regular returns like a fixed income. It is ideal for investors looking for investment diversification with minimum risk, for example, those on the verge of retirement.

 This blog will explore the 5 best fixed-income investment options that can give consistent returns.

5 Best Fixed-Income Investment Options

Investors who expect stability, safety, and capital protection for their investment plans can choose one of the following fixed-income investment options. Understand your risk appetite and expected returns to determine the right investment product for you.

1. Fixed Deposits

Fixed deposits (FDs) have been the go-to investment product for most Indians for a long time. You deposit a certain sum for a fixed maturity period at an interest rate of 5-8% as one of the ideal retirement investment options. Generally, this ranges from 7 days to up to 5 years. FDs are secured short-term investment products.

Certain NBFCs offer better returns compared to traditional banks. Senior citizens earn even a higher interest rate on Fixed Deposits and get tax deductions of up to INR 50,000 u/s 80TTTB. FDs are better than conventional savings accounts, as you can get better returns on the principal investment at maturity.

2. Corporate Bonds

Corporate bonds are a type of debt instrument where investors lend money to the issuing company. Companies legally commit to paying the interest on the principal and returning both the principal and accrued interest (for the last period) when the bond matures. Fixed-income bonds in India are ideal for risk-averse investors seeking capital preservation and predictable income.

Businesses that issue corporate bonds make regular coupon payments, which can boost investor’s cash flow. They are relatively less volatile compared to other types of investment options. Such debt securities offer excellent portfolio diversification. However, returns on bonds depend on the issuer's creditworthiness.

3. Alternative Investments

Due to unprecedented growth in the fintech sector, many alternative fixed-income investments are now available for retail investors. Currently, only 1% of the investment portfolio of Indian investors corresponds to alternative investments, compared to 10% to 20% globally¹.

Unlike traditional instruments, such as fixed deposits, which offer only single-digit returns, alternative investments, like securitised debt instruments, offer higher returns. The risk is comparatively lower than equity investments, making them suitable for short to medium-term investment needs.

Some examples of credit-rated, listed, and regulated alternative investments offered by Grip are LeaseX, which allows investors to earn income from asset-based leasing, and InvoiceX, which allows investors to generate returns from the invoice discounting business model. Similarly, investors can invest in a diversified pool of loans with LoanX and bonds with BondX investment products.

4. Fractionalised Commercial Real Estate (CRE)

As per a research report, the market size of CRE in India is expected to reach $87.57 Billion by 2028². The fintech platforms with technological advancements have enabled this option for individual investors, which was previously accessible only to high-net-worth individuals (HNIs). Investors can earn passive income monthly, quarterly, or annually without the hassle of property management. Tech-savvy middle-class investors can choose to invest appropriately in any location with a starting capital of as low as INR 1 lakh.

5. National Pension Scheme (NPS)

The NPS is a voluntary contribution pension scheme governed by the Pension Fund Regulatory and Development Authority (PFRDA). The money deposited in NPS is invested in different asset classes comprising equity, corporate debt, government bonds, and alternative investment funds. It is a great investment option for those working in the employment sector to receive a steady pension after retirement³.

NPS gives you the flexibility to customise your asset allocation. An investor can change it as per their risk profile and financial goals. NPS has two types of accounts: Tier 1 and Tier 2. You must invest in a Tier 1 account through NPS to get a fixed income after retirement. The total exemption limit u/s 80CCD(1B) is INR 50,000/- which is independent of exemptions available u/s 80C. Hence, you can claim INR 2 lacs as a maximum deduction.

Here is a comparison of various features of the best fixed-income investment options in India:

Conclusion

The volatility of the stock market nudges investors to choose safer investment options. Fixed-income investment products provide assured income, making them safer investment avenues. You can choose from the diverse options catering to your risk appetite and financial goals. Investment diversification across various asset classes and instruments mitigates risk and gets you closer to achieving your long-term financial goals.

Explore Grip Invest to unlock a world of new-age investment options. With minimal investment requirements, Grip Invest makes these opportunities accessible, allowing you to build a diversified portfolio for your financial goals.

Frequently Asked Questions

1. Are fixed-income investment products a good option?

Yes, fixed-income investing allows you to earn consistent and regular income. With diversified products, you can reduce your risks and protect your investment capital from market fluctuations. The returns depend on the type of product you choose.

2. How risky are fixed-income investment options?

Fixed-income products carry different risks, such as liquidity, inflation, default, and credit risks. You may incur a loss if you try to redeem fixed-income investment options before maturity. However, these options are generally considered moderate-risk products with better returns than fixed deposits.

3. Can we break the fixed deposit before maturity?

Yes, we can break a fixed deposit before maturity, but it incurs some penal charges.

References:

1. The Hindu Businessline <https://tinyurl.com/3z7ccprb>
2. Mordor Intelligence <https://tinyurl.com/pk956t6f>
3. Protean <https://tinyurl.com/4rjncnnh>

Want to stay at the top of your finances? 

Join the community of 2.5 lakh+ investors and learn more about Grip Invest, the latest financial knick-knacks, and shenanigans in the world of investing.

Happy Investing!

Disclaimer - Investments in debt securities/municipal debt securities/securitised debt instruments are subject to risks including delay and/ or default in payment. Read all the offer related documents carefully. The investor is requested to take into consideration all the risk factors before the commencement of trading.
This communication is prepared by Grip Broking Private Limited (bearing SEBI Registration No. INZ000312836 and NSE ID 90319) and/or its affiliate/ group company(ies) (together referred to as “Grip”) and the contents of this disclaimer are applicable to this document and any and all written or oral communication(s) made by Grip or its directors, employees, associates, representatives and agents. This communication does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. Grip does not guarantee or assure any return on investments and accepts no liability for consequences of any actions taken based on the information provided. For more details, please visit www.gripinvest.in

Registered Address - 106, II F, New Asiatic Building, H Block, Connaught Place, New Delhi 110001