Fixed deposits (FDs) have been the preferred savings choice for a large section of risk-averse Indians. Even as FDs fetch a lower return compared to several market-tradable securities, the return on investment by and large just about matches the inflation rate.
When putting aside hard-earned money, everybody desires a healthy mix of assets to ensure the invested capital remains unscathed through the course of investment. It is never a bad idea to re-consider the investment strategy to earn a premium return if one can maintain a largely similar risk exposure as it was with fixed deposits.
Given the relatively lower risk in FDs, Raj Khosla, Founder and MD of MyMoneyMantra.com, says several investment options can provide a superior return without jeopardising the overall risk of your portfolio.
Investments, including RBI bonds, Voluntary Provident Fund (VPF) and Public Provident Fund (PPF), are some of the periodic options that can help secure a higher return as against the standard FDs.
PPF’s interest rate of 7.1 per cent is largely on par with that of FDs. Still, it continues to enjoy tax-free treatment, which is not available in the latter’s case, thereby increasing the overall returns at maturity.
On the flipside, RBI bonds garner a return of up to 8 per cent, whereas VPF continues to fetch a return of 8.15 per cent. Investors can also earn an even higher return by exposing their portfolios to riskier investments.
“To start with, investors can choose from several real estate investment trusts (REITs), debt mutual funds, and some hybrid schemes to improve the return efficiency of their respective portfolios,” said Khosla. “REITs can open the portfolio’s door for real estate, while mutual funds can help gain exposure to equities, paving the way for double-digit returns,” he added.
The primary idea is to boost the portfolio’s returns with the right mix of assets by maintaining the risk exposure in a relatively similar position. Investments, primarily based on equity and real estate assets, have the potential to yield a prodigious return that can help big time in your journey of wealth maximisation, said Khosla.
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Nevertheless, investors should practise caution before allocating their funds because hurried and uninformed decisions with money can escalate the possibilities of a downturn, said Khosla.
