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From PPF to NPS to GILTS: 6 investment alternatives to cope up with low interest on FDs

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Fixed deposits or FDs are popular among conservative investors who seek regular income with a safety net. However, the falling rates in the current scenario have become a pain point for them. The reason behind this drop, as cited by financial experts, is the soft interest regime.

From PPF to NPS to GILTS: 6 investment alternatives to cope up with low interest on FDs
Fixed deposits or FDs remain a popular choice of investment among conservative investors who seek regular income with a safety net. Interest rates falling to all-time lows in the current period, however, have become a sore point for FD investors.
With a one-year interest rate pegged at just 5 percent, the returns on FDs are not even able to beat inflation.
Given the soft interest regime, should investors explore alternative investment avenues that offer safety as well as higher returns?
Here are a few investment options one can consider in lieu of fixed deposits:
GILTS or Government Bonds
According to Abhinav Angirsh, Founder, Investonline.in, government bonds are the highest-rated instruments that can be ideal for someone who wants to invest for the long term. One can also invest in them through a mutual fund.
“Corporate Bond Funds fall in this category too. They are a safe option for those looking for higher returns,” Angirish points out.
High Yield Credit Risk Funds
As per Angirish, these are ideal for those having a higher risk appetite.
“They are known to deliver high returns since they invest in low credit instruments. Before investing, however, investors should perform due diligence or consult a good financial advisor,” he suggests.
Ultra Short Term Funds
If the investor wants to invest for the short term, say one year, he/she can invest in Ultra Short Term Funds, advises Angirish.
The biggest advantage of investing in these funds is that it helps the investor to maintain liquidity while generating a slightly higher return.
Fixed maturity Plans (FMPs)
These are best suited for those who seek higher post-tax returns. With FMPs, one can invest in debt instruments of different issuers with the same tenor and maturity as FD.
However, they score very low on the liquidity front.
“The reason being these funds invest their corpus in such a way that it matures with the tenure of the scheme,” Angirish states.
Public Provident Fund (PPF)
Investors with a long-term horizon may consider investing in PPF.
PPF offers an EEE (Exempt-Exempt-Exempt) tax status and comes with a lock-in period of 15 years. The maturity amount and the overall interest earned during the period of investment are tax-free.
National Pension System (NPS)
NPS, introduced by the government, allows individuals to contribute towards building a pension corpus throughout their working life. Those looking to generate decent returns over the long-term can invest in NPS, say experts.
It also comes with several tax benefits.
To conclude, it's important to understand one's investment horizon and risk-taking ability before selecting any of the above listed avenues.
Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.