What are the Best Investment Options in India?

An investor education & awareness initiative.

You have a number of investment options available.

Let’s take a brief look at them:

  • Fixed Deposits with banks or companies offer interest on the deposit amount made over the defined time period.

  • PPF (Public Provident Fund) is backed by the central government and is offered by the post office and by nationalized banks. PPF is similar to a fixed deposit account.

  • Real Estate refers to land or property that is a physical asset.

  • Gold and precious metals, including jewelry, are physical assets that can be kept at home and passed on as inheritance.

  • Government and Corporate Bonds are fixed term investments with contractual interest payments or a pre-fixed repayment price at the end of the tenure.

  • Equities are stocks or shares of a company traded on the stock exchange. When you invest in equity of a company, you become a part owner of the company and have a share in the profits earned by the company in proportion to your stock holding. You can buy stocks of any listed company through a stock broker.

  • Mutual Funds combine different instruments such as stocks or shares, bonds or both into a single product which is managed by an expert fund manager. There are many types of mutual funds suitable for different investors with differing needs and risk profiles.

  • Post Office Schemes such as NSC, Post office recurring deposit, KVP, etc. These are generally secure options since they are government backed and offer a limited but fixed rate of interest.

  • Commodities are materials traded globally such as oil, metals, etc.

  • Collectibles can include antiques or works of art.

The table below can help you to understand the benefits and drawbacks of each investment product

Investment Option Benefits Drawbacks
Fixed Deposit Returns are guaranteed Interest earned is limited
Readily available Not a tax-efficient option as, interest income exceeding Rs 10,000 in a financial year is taxable
Ease of buying Lock-in period, penalty on pre-mature withdrawal
Public Provident Fund

Can start with a small amount.

Lock-in period of 15 years and cannot be partially withdrawn before the end of the 6th year.

Returns are guaranteed.

No tax benefit.

Offers income tax benefits.

Predefined interest since they are not market linked.

Real Estate including property and land

Can provide regular rental income.

Time, money and effort to identify the right property.

Physical and emotional satisfaction of owning a property.

Expensive to purchase.

Helps in saving tax on the loan taken for buying property.

Needs active management in terms of upkeep of property.

Can be used for leaving a legacy. Involves a lot of legal processes in buying/selling

Causes emotional stress if project timelines get extended.

High search cost.

Predicting a rise in real estate prices is difficult.

Time consuming to find a buyer to sell it at the price you want.

Gold and precious metal including jewelry

Tangibility provides reassurance.

Very expensive to buy.

Unaffected by volatility of stock market, can provide diversification and hedge benefits.

Difficult to store safely

Easy to find a buyer

High transaction costs.

If you sell it, you will lose some value.

Emotions attached to gold make it “a difficult to sell” investment.

Appreciates less as compared to other investment products

Government & Corporate Bonds

Assured returns.

Interest rate risk: Rise in interest rate can decrease the market value of a bond. Falling interest rates mean that newly-issued bonds will have lower returns

Low volatility.

Limited returns, hence not suitable for long term investing

Default risk: Risk of receiving less than expected or no payment (in case of corporate bonds).
However, credit ratings are available to help investors assess the likelihood of default.

Equities (popularly known as stocks or shares) Potential of earning high return in the long term.

Highly volatile.

Ease of buying / selling.

Returns are not guaranteed.

Requires effort, research and time.

Can be costly.

Can be unavailable to purchase

Mutual Funds

Simple to invest in.

Returns are not guaranteed.

Offer in-built Asset Allocation and Diversification.

Customization of portfolio not possible

Can start with a small amount Risk of over-diversification if one invests in similar schemes
Ease of buying/selling
Highly liquid
Offers tax benefits
Professionally managed
Highly regulated
Commodities In certain circumstances, negatively correlated to broader stock market hence provides diversification and hedge benefits Difficult to buy and sell
Holding a commodity can provide protection against geopolitical risks (The risk of negative impact on an investment's returns due to political changes or instability in a country).

Can be an alternative to traditional forms of investments as it can appreciate significantly in certain circumstances.

Difficult to buy and sell.

Ease of buying.

Difficult to assess value and can be expensive

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Key Takaways

  1. Investments can be broadly categorized into physical assets and financial assets.

  2. Different investment options have differing features, risk and benefits and hence suit different needs.

  3. Mutual Funds are a good starting point for most investors as they combine the benefits of investing in many different products such as stocks or shares, bonds or both into a single product which is managed by an expert fund manager.

Disclaimer: All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (‘RMF’). For more info on KYC, RMF & procedure to lodge/redress complaints, visit This is an investor education & awareness initiative by DSP Mutual Fund.