How To Analyze Risk-Free Investments With High Returns?

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How To Analyze Risk-Free Investments With High Returns?

What is the risk-free rate?
The Best Risk-Free Investment Plans in India
Summary of Aforementioned Investment Plans
Conclusion

In India, investing is a crucial component of wealth creation. Financial stability is achieved by reducing inflation, achieving financial objectives, and stabilizing the economy. You can invest your money in a variety of ways, such as stocks, equities, mutual funds, and fixed deposits, as opposed to letting it sit dormant in your bank accounts. By making investments in the best investment options available in India, you may be able to achieve your financial objectives and create a financial cushion for the future to live comfortably. In contrast to other asset classes, there are some investment plans available on the market that are both highly risky and have the potential to produce favorable long-term returns. Choosing the best investment plan among the many options could be difficult. You can increase your savings by using these investment strategies. But before we get started, let's explain what risk-free rates are.

What is the risk-free rate?

The risk-free rate of return is the minimum interest rate an investor may expect to earn on a risk-free investment. This is a theoretical idea developed by respective experts because, in actuality, there is no such thing as a risk-free investment. Inflation is subtracted from the yield on the Treasury bond that corresponds to the investment's duration to calculate the supposed "real" risk-free rate.

The Best Risk-Free Investment Plans in India

If you're wondering which Indian investment plans are risk-free, then check out these tables below.

Public Provident Fund (PPF)

Investing in this fixed income program is risk-free since the government guarantees its returns.

Public Provident Fund (PPF)
Availability	● It is available at almost every Indian bank and post office. ● The age requirement to open an account is unrestricted. Up until the age of 18, a minor's guardian manages their account. ● You can only have one account.
Investment Amount	● The annual minimum investment amount is 500 INR. ● The annual maximum is INR 1.5 lakh. ● In a fiscal year, you may deposit one to twelve times.
Investment Return	● Currently, the annual interest rate is 7.10%. ● PPF rates of interest are floating, which means they could alter on a quarterly basis. In general, the interest rate change ranges from 0.25% to 0.75%.
Maturity	A PPF fund reaches maturity after 15 years. After five years from the date the account was opened, partial withdrawals are permitted.
Taxation	PPF investments are tax-free. Your investment's interest income is also tax-free.
The Level of Risk Involved	Minimal to none

National Savings Certificate (NSC)

The NSC is a fixed-income investment program backed by the government that is regarded as a risk-free investment.

National Savings Certificate (NSC)
Availability	The certificate is easily available at all post offices, some private banks, and public banks in India.
Investment Amount	● There must be a minimum investment of INR 1,000. ● The desired deposit can be made all at once, in 12 installments of any multiple of 100, within a single fiscal year. ● There is no maximum investment.
Investment Return	● The Ministry of Finance announces a quarterly interest compounding rate, which is applied annually. ● In the last period of the maturity period, interest is paid.
Maturity	● A five-year lock-in period applies to NSC. ● Premature withdrawal is possible in circumstances like the certificate holder's death.
Taxation	● Section 80C of the Income Tax Act exempts investments up to INR 1.5 lakh per year from your taxable income. ● Although interest is not taxed annually because it is reinvested, the final portion of interest will be taxed according to your regular tax bracket.
Level of Risk Involved	Minimal to none

Post Office Monthly Income Scheme

The program allows account holders to benefit from the interest accrued on lump-sum deposits that are paid on a monthly basis. Both individual and joint accounts are eligible for the 6.60% interest rate offered by the government-backed program.

Post Office Monthly Income Scheme
Availability	The Indian postal service offers single accounts, joint accounts (up to three adults), accounts under the names of minors over 10 years old, guardians or parents of minors, and accounts for unsound minds.
Investment Amount	Opening an account requires a minimum deposit of INR 1,000, and the maximum balances for single and joint accounts, respectively, are INR 4.50 lakh and INR 9 lakh.
Investment Return	● The program offers a monthly interest payment at a rate of 6.60% annually. ● The depositor's savings account may automatically receive the interest payment, or it may be cleared electronically.
Maturity	● The account may be closed five years after it was first opened. Premature closure, though, is prohibited before the year mark. ● Similarly, 2% is If the account is closed between one and three years, 1% of the principal will be subtracted; between three and five years, 2%. ● If the depositor passes away prior to the maturity period, nominees may submit a claim.
Taxation	Deposit interest is subject to taxation.
The Level of Risk Involved	Minimal to none

Government Bonds

To promote domestic participation in the sovereign bond market, the Indian government has made direct bond purchases available to individuals who previously could only trade in government bonds through gilt mutual funds.

Government Bonds
Availability	● Prior to the auction date, the government makes its bond offering public. These bonds are issued by the federal government as well as the state governments. ● The state issues State Development Loans, and the Center issues G-Secs, or simply "government bonds." ● Having a bank account is necessary for purchasing government bonds. ● A Demat account can be used to hold government bonds.
Investment Amount	● When the government announces bonds, the price of the bond is also disclosed. ● The e-Kuber App, the preferred application of the country's central bank, the Reserve Bank of India, is the simplest way to invest in G-Secs. ● The other option is to take part through a primary dealer or a commercial bank that has been listed by the government for that purpose. You will need to create a security account for that. ● Additionally, stock exchanges allow you to purchase it. The National Stock Exchange has the NSE goBID mobile application, while the Bombay Stock Exchange uses NCB-GSec, an online platform. ● A brokering platform may also be used to purchase it. ● Mutual funds that invest in government securities are another option. These funds make government bond investments.
Investment Return	● The interest rate on the majority of government bonds is fixed, meaning it will remain that way until the bond matures. ● You receive a half-yearly interest for the required bond holding period, based on the coupon rate decided at the time of bond purchase. ● Interest on income is generated by reinvesting interest payments.
Maturity	Depending on the offering, a government bond's maturity period may be one year or longer.
Taxation	Interest generated by bonds is taxed according to a person's income bracket. Any increase in the bond's price will also be treated as a capital gain and subject to the appropriate taxes.
Level of Risk Involved	Minimal to none

Sovereign Gold Bonds (SGBs)

The Reserve Bank of India (RBI) is the issuer of SGBs, which are government securities valued in grams of gold. They have a minimum investment of 1 gram and are issued in multiples of grams of gold.

Sovereign Gold Bonds (SGBs)
Availability	● On dates specified by the central government, SBGs are available for bidding. The RBI issues these bonds several times per year. ● A PAN Card is required to purchase an SGB. ● Banks, post offices, and stock brokerage firms all offer SGB purchases, both online and offline.
Investment Amount	● Based on the average closing price of gold over the last three business days, each bond unit you buy is equivalent to one gram of pure gold. ● SGB purchases are limited to 4 kg per individual and 20 kg per trust.
Investment Return	Twice-yearly payments of 2.5%.
Maturity	● 8 years. ● Redeeming early after five years.
Taxation	Depending on your tax bracket, you will pay more or less in taxes. Gains made upon maturity are tax-free.
Level of Risk Involved	Minimal to medium

Summary of Aforementioned Investment Plans

Risk-Free Investment Plans	Investment Returns	Tax Exemption
Public Provident Fund (PPF)	7.10% per annum.	Up to Rs.1.5 lakh- under Section 80C
National Savings Certificate (NSC)	6.8% per annum .	Up to Rs.1.5 lakh- under Section 80C
Post Office Monthly Income Scheme	6.60% per annum.	Section 80C tax deductions are not available under this scheme.
Government Bonds	Most government bonds have fixed interest rates, which means they won't change until the bond matures. (interest rate: 9.62% as of May-October,2022)	Bond interest is taxed based on an individual's income bracket.
Sovereign Gold Bonds (SGBs)	2.5%	Annually, the interest is added to the taxable income and taxed according to the bondholder's tax bracket.

Conclusion

All of the investment plans that are discussed here are risk-free investments and aim for varying rates of return. All of your investing needs cannot be met by any one of the investment products. You must carefully construct a portfolio of various investment products based on your goals. It is never easy to understand your goal profile, the best investment options, the best exit strategy, etc., but Agarwal Corporate can assist you with these issues. To handle these important investment decisions, you require ongoing advice from a professional.