Why stick with FDs when these six financial instruments can give over 7% returns

Traditionally, fixed deposits (FDs) was considered as the most secured option to park money. With less knowledge about other financial instruments, FDs were regarded as safe investment as it helped people to grow their financial assets without exposing them to volatility and other risks associated with the financial market.

Depending on the tenure, the banks offer interest rates in the range of 6-7%. This year, since the beginning, the banks are reducing the rates even more to woo investors. But, with the change in time and investors getting more aware about other financial instruments, FDs are not looked as it was earlier. 

However, if you are still stick with FDs, we tell you what other options you should look at:

1. Senior Citizen Saving Scheme

Designated for individuals above the age of 60, the Saving Schemes for senior citizens in India are effective, long term saving options and offer unmatched security and features that are usually associated with any government sponsored savings program. 

These schemes are available through certified banks as well as the network post offices spread across India. The typical SCSS account extends upto five years and upon maturity can be subsequently extended for an additional three years. The depositor is allowed to make one deposit into this account, an amount that is a multiple of Rs 1,000 and not extend beyond Rs 15 lakhs, as explained by Bank Bazaar. 

Presently, the scheme offers an interest rate of 8.3%. 

2. Mutual Funds

A mutual fund is a pool of savings contributed by multiple investors. The common fund so created is invested in one or many asset classes like equity, debt, liquid assets etc. 

One of the safest option in MF is Debt Mutual Funds. To make debt mutual funds, more "liquid" in nature, investors can look for Liquid Funds. 

Liquid funds are short-term debt mutual funds where an investor has the option to park one's fund for few days or months and earn returns for the holding period as per market rates. Liquid funds provide average returns of 7-8%, which is higher than what even many FDs today provide. 

3. Employee Provident Fund

The Employees’ Provident Fund (EPF) is a corpus of funds built through regular, monthly, contributions made by an employee and his/her employer. The amount contributed to the fund is based on a fixed rate. Employees earn interest on their EPF balances. 

Both, the interest earned and the total amount withdrawn at maturity are tax-free, making this one of the most popular forms of long-term retirement savings. The latest EPF interest rate stood at 8.8% p.a. (2015 - 2016). Interest rate for EPF deposits for the year 2016 - 2017 is 8.65%.

4. Public Provident Fund

People can deposit funds in PPF accounts for a fixed period of time to earn returns on their savings. The PPF of interest rate for the financial year 2015 - 2016 was 8.7%. This rate has been revised in the Union Budget 2016 for FY16 - 17 to 8.1%.

They are also tax-free accounts, easily accessible, safe (being backed by the government) and simple to understand.

5. National Pension Scheme

National Pension Scheme is a contribution scheme launched by the Indian government, which offers a large variety of investment options to employees. The scheme helps individuals make decisions with regards to where they should invest their pension wealth. 

Unique Permanent Retirement Account Numbers (PRAN) are allocated to each subscriber under the NPS at the time of their joining. Subscribers are also allocated two accounts, which they can access at any time. 

NPS schemes can earn a subscriber anywhere between 12% - 14% interest, which is still on the higher side when taking other investment options into consideration.

6. Post Office Monthly Income Scheme

Investors are rewarded with assured returns every month on their deposit. This is one of the most beneficial investment options that can be procured as it offers returns, ensures that the capital invested is intact and also provides a fixed income every month. 

This scheme is provided by the Indian Postal Service and is administered by the Finance Ministry of India, making this one of the most secure options to invest in.

As of 1 April, 2016, the revised rate of interest applicable on the Post Office Monthly Income Scheme is 7.80% per year, and is payable monthly.

Disclaimer: This story is for informational purposes only and should not be taken as an investment advice

ALSO READ:

• Are liquid funds a good option as bank saving interest rates drop?
• Even a two-year break from your Rs 1000 monthly SIP can cost you lakhs
• Want to buy a car but not pay EMIs? We have a solution
• Invest Rs 1 lakh to earn 37 times more return in 20 years