Safe Investment Havens

At troubled times like these, safety of the investment is of prime concern to most investors across the country. When we check safety as a primary criterion, we may have to compromise on the return on investment (ROI)
Safe investments (Like the ones we are going to see in this article) would give you returns of around 8% per annum with a full 100% guarantee on the invested amount.
Even in such difficult times, I would suggest equities for investment because they would outpace the returns of all other asset classes always, considering the interests of the conservative investor is also important. This article is for the conservative investor for whom the motto “Safety First” is etched on stone and they would never compromise on that.

Let us have a look at some of these investment options and their strengths which would tempt us to choose them to park our funds.

1. Bank Fixed Deposits
2. Post Office Time Deposits
3. Kisan Vikas Patra
4. National Savings Certificate
5. Post Office – Monthly Income Scheme (POMIS)
6. Post Office – Recurring Deposits (PORD)
7. Public Provident Fund (PPF)
8. Senior Citizen Savings Scheme

Bank Fixed Deposits:

Bank FDs have been one of the most prominent saving instruments for the average Indian citizen. If you happen to ask a person who is of our father’s age (Assuming you are in your 20’s or 30’s) one of the first choices for saving money would be a Bank Fixed Deposit. These are very safe investments where the bank is bound to repay our money along with interest at maturity or even before maturity if you wish to close the account.

Positives:

1. 100% safe
2. Tenure ranging from one month to 5 years is available
3. Rate of Interest ranging from 5% to 9% (An extra 0.5% for senior citizens)
4. Tax benefits on investment upto Rs. 1 lac for 5 year tax saving deposits
5. No upper limit on investment

Negatives:
1. Interest earned on the deposit is fully taxable
2. Penalty charges may be levied if you wish to close your deposit prematurely (i.e., before the scheduled maturity date)

Post Office Time Deposits:

Post office time deposits are similar to Bank fixed deposits with one major difference. You open the deposit account in a post office instead of a bank.

Positives:
1. 100% safe
2. Tenure ranging from 1 to 5 years is available
3. No upper limit on investment
4. Rate of interest ranging from 6.25% to 7.5% (Compounded Quarterly)

Negatives:
1. Interest earned on the deposit is fully taxable
2. No Income Tax benefits

Kisan Vikas Patra
KVP is similar to the Post office Time Deposits. These are close ended deposit products launched by Indian Post office where our money would double in 8 years and 7 months. Assuming you invest 1 lac today in KVP, your money would be worth 2 lacs at the end of 8 years and 7 months.

Positives:
1. 100% safe
2. No upper limit on investment
3. Rate of interest 8.41% (Accumulated Interest is compounded yearly and paid on maturity along with our principal)

Negatives:
1. Interest earned on the deposit is fully taxable
2. No Income Tax benefits

National Savings Certificate:

NSC certificates are certificates of deposits issued by the government of India. Any Indian can deposit cash in NSC. This money would be used by the government for its cash needs.

Positives:
1. 100% safe
2. No upper limit on investment
3. Rate of interest 8% (Compounded half yearly)
4. Tax benefits. Investments upto Rs. 1 lac are exempt from income tax under sec 80C
5. Investment tenure is 6 years

Negatives:
1. Interest earned on the deposit is fully taxable

Post Office Monthly Income Scheme (POMIS)

The POMIS is a scheme launched by the Indian post office where an investor can invest a lumpsum amount on which the interest would be paid out monthly. This is used as a regular source of income for many senior citizens.

Positives:
1. 100% safe
2. Rate of interest is 8% and is paid monthly
3. Investment tenure is 6 years

Negatives:
1. Interest earned is fully taxable
2. Upper limit on investment is Rs. 4.5 lacs for individual accounts and Rs. 9 lacs for joint accounts

Post Office Recurring Deposit (PORD)

The PORD is a recurring deposit scheme that is launched by the Indian post office. In this scheme, an investor can deposit a small sum of money on a monthly basis and the amount would be paid on maturity as a lump sum along with interest.

Positives:
1. 100% safe
2. Rate of interest is 7.5% (Compounded Quarterly)
3. No upper limit on investment
4. Tenure is 5 years

Negatives:
1. Interest earned is fully taxable

Public Provident Fund (PPF)

PPF is similar to the normal Provident Fund with the only difference being, anyone can open a PPF account by visiting the nearest State Bank of India branch. PPF is also managed by the government of India. Once we open a PPF account we can deposit cash in our PPF account anytime.

Positives:
1. 100% safe
2. Rate of Interest is 8% (Compounded yearly)
3. Investment tenure is 15 years
4. Tax benefits under sec 80C for investments upto Rs. 70,000/-
5. Returns on investment are tax free

Negatives:
1. One can invest only Rs. 70,000/- per year
2. Must invest atleast Rs. 500/- every year to keep the account active.

Senior Citizens Saving Scheme

Senior Citizens savings scheme is a special deposit scheme meant for senior citizens (Individuals who are over 60 years of age) You can invest in this scheme through either post offices or through nationalized banks like SBI.

Positives:
1. 100% safe
2. Rate of Interest is 9% per annum (compounded quarterly)
3. Tax benefits on investments upto Rs. 1 lac under sec 80C
4. Investment tenure is 5 years

Negatives:
1. Upper limit on investment is Rs. 15 lacs
2. Interest earned on investment is fully taxable.

Recommendation:
As the options discussed above are all 100% safe they are a must have in ones investment portfolio. Based on your age, the share of these investments in your portfolio would vary. As a rule of the thumb, you must have a % of your investments equaling your age in these instruments. Assuming you are 30 years old, 30% of your investments should be in such options and the remaining 70% in other options like equities, real estate, gold etc.

Happy Investing!!!