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7 Alternatives To Fixed Deposits: Know Their Benefits And Risks

Fixed deposits are evergreen investing tools for most Indians; however, there are alternatives for the 'exploring kind'.

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Outlook Money
December 1, 2023
7 Alternatives To Fixed Deposits

7 Alternatives To Fixed Deposits

Bank fixed deposits (FDs) are generally the mainstay of a senior citizen‘s investment portfolio. Thanks to the attractive interest rates, guaranteed income, and safety they offer. But those looking for something extra to spice up their investment portfolio have options, too. We can explore 7 Alternatives To Fixed Deposits for Seniors though after a certain age, most people want to avoid the rat race of wealth accumulation by relying on a few time-tested tools for income and safety. If they look around, they may find other safe havens.

Here are 7 alternatives to fixed deposits that senior citizens can explore.

Debt and Equity Mutual Funds

Mutual funds offer an excellent opportunity to build wealth even after retirement. Think of ultra-short or medium-term debt funds. They could be a valuable asset in the portfolio, provided they take professional help if they are new to the stock market. Additionally, they can invest in reputed equity mutual funds, which have demonstrated decent returns. Ideally, these are for the long-term, but they can deliver in the short-term, too, if the going gets right. But remember to balance your portfolio with different assets and don’t over-rely on any one asset class.

Public Provident Fund (PPF)

Seniors can also explore PPFs for steady income. PPF offers attractive interest rates besides tax benefits under Section 80C of the Income Tax Act. The contributor can claim a deduction of up to Rs 1.5 lakh in a financial year. Moreover, the interest and the maturity sum are also tax-free. Although the lock-in is 15 years, there is an option for premature withdrawals in PPF. This scheme is ideal for long-term wealth creation. The interest rates are revised quarterly.

Gold Investments

Nowadays, there are many options to buy gold for investment. The options range from physical gold, gold exchange-traded funds (ETFs), and sovereign gold bonds (SGBs) to gold mutual funds. Investors can choose these instruments based on their investing horizon, financial goals, and income. These are some of the best investment instruments for risk-averse investors looking for modest returns with minimal market risks. That is why it’s one of the 7 Alternatives To Fixed Deposits for senior citizens.

Real Estate Investment Trusts (REITs)

These instruments have become popular lately. REITs offer investors to acquire a share of a property in units, allowing them to invest what they can afford. In contrast, investments in physical property require vast sums of money, which many people can’t afford. On the other hand, REITs allow investors to benefit from the rental income and capital appreciation through the units they hold. REITs invest in real estate and the allied sectors and, like mutual funds, are traded on the stock exchanges. REITs can be a great option to diversify your portfolio.

Equity-Linked Savings Schemes (ELSS)

ELSS offers dual benefits of possible capital appreciation and tax benefits under Section 80C. ELSS schemes mainly invest in equities and have a three-year lock-in. Those with a slightly higher risk-taking ability and an investment horizon of at least 5-7 years can opt for ELSS, but remember to seek professional guidance before picking a plan. Deductions up to Rs 1.5 lakh are allowed in a financial year if invested in an ELSS scheme under the old tax regime.

National Pension System (NPS)

The National Pension System is another excellent option to build a pension fund with a Tier 1 account. The account holders can also open a Tier 2 account to make surplus investments in the stock market. Tier 2 accounts are like any other investment vehicle that invests in equities, debt, and alternative investment instruments. NPS subscribers can also choose their fund managers. NPS contributions also get tax relief up to Rs 2 lakh under the Income-tax Act.

Corporate Fixed Deposits (FDs)

Seniors can also explore corporate FDs from non-banking financial companies (NBFCs) for a fixed tenure at a predetermined interest rate. Corporate FDs may offer a slightly higher interest rate than bank FDs but may come with risks. So thoroughly research the company’s creditworthiness before investing.

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