There was a time when investors were seeking safe returns, and fixed deposits were the gold standard. Although fixed deposits have historically provided conservative investors with a haven, they frequently produce inferior returns, particularly in an inflationary climate. However, as the financial situation changed, these formerly trustworthy allies started to exhibit their shortcomings, most notably their inability to keep up with inflation. The search for more profitable options also got underway.  

This blog explores various top alternative investments to fixed deposits that can potentially offer higher returns and greater financial security.  

Fixed deposits are low-risk investment choices in which money is deposited at a certain interest rate for a predetermined period. However, you are receiving a modest return on your investment, particularly given the current high-return climate. Fortunately, several funds may be invested in to satisfy different risk appetites and provide higher returns than fixed-rate bonds (FDs).  

List of alternatives to Fixed deposit:  

1. Peer-to-Peer (P2P) Lending  

P2P lending platforms connect the borrower with lenders directly through a website or app. Investors can earn attractive returns that often exceed, as they charge interest on loans provided. It also comes with risks such as borrower defaults and diversification across multiple loans can mitigate some of the risks. You can invest through manual and automated lending.  

Manual Lending  

One approach to earning decent returns and diversifying your portfolio is through manual lending. With this approach, you have total control over the loans you make and may perform due diligence and analysis before committing.  

Auto invest:  

Auto Invest is a feature that helps you automate your lending. Monexo is India’s first peer-to-peer lender that provides the ability to do automated investments in loans listed in the marketplace. It’s a hands-on way to find and fund loans without logging into the Monexo platform. Once you set the lending rules, orders are placed automatically. It is that simple!  

Why is it better than Fixed Deposits?  

Start with 10,000 INR: In P2P you can start with an initial amount of ₹10000. This allows you to distribute their lending amount across various loans and helps to diversify risk.  

Selective Lending: P2P gives you the freedom to choose the borrower by using detailed demographic, financial, and credit assessments to make informed decisions.  

Flexible periods: With periods ranging from one month to three years, you are free to decide how long you want to lend money. This makes it possible for your financial goals to be more aligned.  

Compared to fixed deposits, both manual and automated lending solutions provide distinct benefits and can accommodate varying investor preferences and financial objectives.  

2. Mutual Funds  

Mutual funds are essential collections of money from multiple investors in diversified portfolios of stocks, bonds, or other securities. This lump sum of money is handled by professionals, which means that investors can benefit from expert guidance. However, it’s essential to recognize that mutual funds carry market risks, and their performance can vary depending on market conditions.  

Why Consider Mutual Funds?  

High returns: Over the long term, mutual funds often outperform fixed deposits.  

Liquidity: Most mutual funds allow the investor to redeem their investment when needed.  

Investment Horizon: Depending on the type of debt fund, they are appropriate for short- to medium-term investments with a duration of a few months to a few years.  

3. NSC National Saving Certificate:  

The Indian government offers National Savings Certificates, or NSCs, through post offices. It’s a safe investment choice with consistent results in mind. Nscs may provide substantial tax advantages under income tax section 80c. For risk-averse investors searching for a secure and cost-effective approach to increasing their funds, NSC is a compelling option.

4. PPF (Public Provident Fund) :  

PPF stands for Public Provident Fund a government-backed savings scheme. It is a long-term investment scheme offering tax benefits and attractive returns. PPF accounts have a 15-year lock-in period, making them suitable for long-term financial goals. PPF is a safe, tax-advantaged option that can be particularly appealing for individuals looking to build a retirement corpus.  

Benefits of PPF:  

• Government-backed security  

• Tax benefits under sections of income tax regulations  

• Compound interest leads to significant growth  

5. Real Estate  

Buying property for capital growth or rental revenue is known as investing in real estate. With the potential for steady cash flow and asset value increases, real estate can provide substantial returns over time. This way of investing requires a higher initial capital outlay and involves ongoing maintenance and management, but for many, it’s a reliable long-term investment strategy.  

6. Corporate Fixed Deposits:  

Investors can place corporate fixed deposits and receive a predefined interest rate for leaving their money with the companies for a predetermined period. The majority of companies that issue corporate fixed deposits are finance companies and non-banking financial corporations (NBFCs). Corporate fixed deposits are a tempting option for investors who want steady returns over a certain period.  

Conclusion:  

Although fixed deposits are a reliable option for investing, considering alternative investment options is crucial to achieving higher returns in the current low-interest rate climate. Every investor can find a good substitute for fixed-rate bonds (FDs), whether they are seeking higher-yield investments like real estate and stock mutual funds, or safer options like PPF and NSC. You can make well-informed decisions and create a diversified portfolio that yields superior results by taking into account your risk tolerance, investment horizon, liquidity requirements, and tax consequences.