Best Investment Options in India in 2023

Some people invest because they need financial security, whereas others do it to achieve their investment goals. The best way to invest money should be based on your risk appetite, investment horizon, financial goals, and liquidity needs.

In India, the best investment options can be broadly classified into two categories: financial and non-financial assets. We can further divide the financial assets into market-linked securities such as mutual funds, stocks, bonds, etc., and fixed-income products like bank FDs, Public Provident Funds (PPF), and bank RDs. Non-financial assets include gold investments, real estate, Treasury bills, etc.

In reality, returns and risks are directly proportional, which means the higher the risk involved, the higher the chances of returns. When choosing the best investment plan, it is inevitable to match the risk profile of the investor with the related risk of the product before investing. 

Investing in the best investment options in India can not only achieve your financial goals but also create a financial cushion for the future and help you live a secure life. This is the reason why investors are always in search of top investment plans where they can multiply their money as per their risk appetite.

Top Investment Options in India in 2023

Below are some of the best investment options in India through 2023 that offer high returns. You can consider including these investment plans in your financial Portfolio while saving for the future.

Disclaimer: Policybazaar does not endorse, rate, or recommend any particular company or product. The policyholder bears the investment risk in the investment portfolio.

Now, let us take a quick understanding of each of the best investment options with high returns in India in 2023, one by one:

1. Unit Linked Insurance Plan (ULIP)

   Unit Linked Insurance Plans (ULIPs) are considered one of the best investment options in India. They offer the dual benefits of insurance and investment. Besides, ULIP plans also provide the advantage of tax exemption. These plans come along with a lock-in period of 5 years. Under ULIPs, a part of the premium is used for insurance coverage, whereas the remaining premium is invested in market-linked instruments such as shares, bonds, and much more.

   Features of ULIP:

   • Provides the investor with the flexibility during investment tenure to invest as per the risk appetite.

   •  ULIPs are a long-term investment and help you to reap maximum returns.

   • Let us you avail of tax-free maturity returns.

   • It lets you pay a premium at a pre-defined time and enjoy the benefits for the entire policy period.

   •  ULIP plans to provide the advantage of tax exemption. 

   • These plans come along with a lock-in period of 5 years.

2. Public Provident Fund (PPF)

   Public Provident Fund (PPF) is one of India's most secure long-term investment options. PPF is a tax-free investment scheme, and one can easily open an account at any bank or post office. The invested money is locked up for a tenure of 15 years that can be extended for the next 5 years. The only drawback of having a PPF account is that you can withdraw the invested money only by the end of 6th year. If you need the money, you can take a loan against the balance of the PPF account.

   PPF Interest Rate from 2012 to 2022

   Let us look at the interest rates offered by the PPF account from the years 2012-2022:

   Financial Year	Interest Rate (% p.a.)
   2012-2013	8.80
   2013-2014	8.70
   2014-2015	8.70
   2015-2016	8.70
   2016-2017	8.00
   2017-2018	7.60
   2018-19	8.00
   2019-20	7.90
   2020-2022	7.10

   **PPF rates represented above are for the last 10 years.

   **The interest earned on PPF is tax-free, making it one of India's best investment options.

   Features of Public Provident Fund (PPF):

   • Being a government-backed scheme, the principal and the interest returns in the PPF account are safe and guaranteed.

   • Upon investment, it has a lock-in period of 15 years. The lock-in period can also be extended up to 5 more years post the completion of the previous lock-in period.

   • On an annual basis, the minimum premium amount to be invested is Rs. 500 up to Rs. 1.5 lakh.

   • PPF also provides the benefit of availing loans against the investment amount after saving in a PPF account for 3 years.

   • You can withdraw the invested money only by the end of 6th year. 

   • You can take a loan against the balance of the PPF account.

3. Mutual Fund

   Mutual Funds are one of the best ways to invest money in India, offering high returns on investment over the long term. It is a market-linked investment alternative that invests money in various financial instruments such as equity, debt, stocks, money market funds, and much more. The returns are generated as per the market performance of the fund. The 3 major investment options offered by mutual funds are:

   Equity Funds

   Investment under equity funds is made in equity and equity-linked securities. Under equity funds, 65% of the Portfolio's total assets can be invested under the equity category. Equity funds offer higher returns as compared to debt or hybrid funds in general. Having said that, returns also depend upon the kind of investments being made.

   The Securities and Exchange Board of India (SEBI), to bring uniformity to the mutual fund based on the market capitalization sphere, is divided into the following sub-heads.

   • Larger Cap Equity Funds

   • Mid-cap Equity Funds

   • Small-cap Equity Funds

   • Multi-Cap Equity Funds

   • Flexi Cap Equity Funds

   Debt Fund

   Under debt funds, 65% of the Portfolio's total assets can be invested in debt securities.

   Some common securities are money markets, fixed income treasury bills, government bonds, certificates of deposit, etc. Debt fund investment is ideal for investors who are not willing to take major investment risks, like in the case of equity funds.

   Categories under debt funds are:

   Debt Funds	Features
   Dynamic Bond Fund	The Portfolio is influenced by interest rate fluctuation
   Income Fund	Instruments with a maturity period of over 5 years
   Short and Ultra-Term Debt Fund	Instruments that mature in 1 to 3 years
   Liquid Fund	Funds invested in assets and securities that mature in 91 days or less, providing high returns
   Gilt Fund	The investment made in high-rated government securities to prevent the risk element
   Credit Opportunity Fund	investment in low rated securities that offer high returns, making it the riskiest of all debt funds
   Fixed Maturity Plan	Close-ended debt funds like government bonds where investment is made only during the offer period

   Balanced or Hybrid Fund

   Balanced funds are generally a combination of equity and debt funds. Under hybrid or balanced funds, the main purpose is to balance the risk-reward ratio.

   The primary objective of the fund manager when working on balanced funds is to diversify the Portfolio in accord with the market conditions. The sink should be in such a way that it works for the investor's benefit.

   Categories under Hybrid Funds are:

   Hybrid Funds	Features
   Equity-Oriented Hybrid Fund	65% of the Portfolio is invested in equities, and the rest in fixed-income instruments
   Debt-Oriented Hybrid Fund	Must invest a minimum of 65% of the Portfolio in debt instruments and the rest in equity
   Monthly Income Plan	The major part is invested in debt instruments and under 20% of the Portfolio in equities for steady returns monthly, quarterly, or annually
   Arbitrage Fund	The aim is to maximize returns by purchasing securities at low prices in one market and selling them in another market at a higher price to make a profit

   Features of Mutual Funds:

   • Mutual funds let you have a diversified investment portfolio and help you attain your investment objective.

   • Every mutual fund scheme has an assigned fund manager who helps you choose a lucrative investment for the scheme.

   • Investments in mutual fund schemes are also beneficial, as you are exempt from the IT tax.

   • Investing in mutual funds is transparent, which helps the investor make an informed decision.

4. Bank Fixed Deposits

   Consistent with its name, Fixed Deposits offer fixed returns over the tenure of the investment. According to the bank rules, the profits are payable month-to-month, quarterly, or yearly.

   Depending on the bank, FDs offer both cumulative and non-cumulative options for investment. When it comes to the non-cumulative option, as per underwriting, the interest will be paid. On the other hand, the interest will be re-invested and paid at maturity within a cumulative option. This makes it one of the best investment options in India. Investments in fixed deposits can be made online or by visiting any nearest branch of the bank.

   Features of Bank Fixed Deposits:

   • Investing in bank fixed deposits gives you financial stability and a safe instrument tool, which lets you earn high returns on a surplus fund.

   • The renewal of bank fixed deposits is easy.

   • Certain banks provide overdraft facilities against fixed deposits.

   • The market fluctuation does not affect the fixed deposit, and the returns are fixed as well.

   • FDs offer a range of tenures (7 days to 10 years), and the investors can choose the investment as per their investment horizon.

   • The FD interest rates are attractive, ranging from 6.00% (for regular account holders) to over 7% (for senior citizens) for the tenure of 1 year.

5. National Pension Scheme (NPS)

   NPS is one of the best investment options, which is government-backed and offers pension solutions. The fund invests in bonds, government securities, equity, and other investment alternatives as per the investor's preference.

   It offers two options: auto and active. Under the auto option, the funds are invested automatically in different assets, whereas the active option enables the investor to invest in assets as per their choice.

   Features of National Pension Scheme (NPS):

   • Investing in an NPS provides the flexibility of choice between auto and active.

   • NPS also permits investors to make partial withdrawals of funds.

   • NPS lets you remain independent even after you retire.

   • The lock-in period depends on the investor's age, as the scheme only matures when the investor turns 60.

   • The accumulated interest is tax-free.

   • When one chooses the lump-sum payment upon maturity, 40% of the maturity proceeds are tax-exempt. 

   • If one opts to receive the pension post-maturity, the amount is taxable as regular income.

6. Senior Citizen Savings Scheme

   Senior Citizens' Saving Scheme (SCSS) is one of the risk-free tax-saving investment options available in India for senior citizens above 60 years. It is one of the best investment options for senior citizens because it offers them a regular income.

   Features of Senior Citizen Savings Scheme:

   • At the time of opening an SCSS account, the nomination facility is accessible.

   • The scheme offers a high rate of interest, i.e., 8.00%.

   • In case of any financial emergencies, the alternative is to withdraw the fund prematurely.

   • The tenure of this investment scheme is flexible.

   • SCSS is available across India through post offices and banks. 

   • The maximum amount one can invest in this scheme is Rs. 15 lakh.

   • While the tenure of the scheme is 6 years, it can also be extended for 3 years.

7. Direct Equity

   Direct equity is considered one of the best long-term investment options. Even though investors consider direct equity to be a high-risk investment option, the returns offered by direct equity funds are higher than any other investment option available in the market.

   When it comes to investing in direct equity investment plans, it is prudent to consider certain aspects, such as picking the right stock and timing of your entry and exit in the market. Before investing in direct equity, make sure you know how to analyze it.

   Please Note: To invest in a direct equity fund, the investors are required to open a Demat account.

   Features of Direct Equity:

   • The investor gets into the legal terms of buying the ownership of a company.

   • Investing in direct equity has a greater reward.

8. Real Estate Investment

   One of the fastest-growing sectors in India is real estate, which holds great prospects in different sectors such as retail, housing, manufacturing, commercial, hospitality, and much more. Buying a flat or plot is the best decision among the investment options available in India. 

   Features of Real Estate investment:

   • Investments in real estate have a high tangible asset value.

   • Investing in real estate also lets you have a portfolio, which lowers your volatility and provides high returns.

   • Wait until the right time, and accordingly, sell the property and liquidate the investments.

   • The risk is low because the value of the property increases within 6 months.

   • Real estate investment works as an asset, making it one of the best investments with high returns over a long-term period.

9. RBI Bonds

   RBI bonds are furnished in Demat mode only and are accredited to the investor's Bond Ledger Account (BLA).

   The bonds are issued for Rs. 1000, and the investors get a Certificate of Holding as proof of the investment.

   With the non-cumulative option, the interest can be accessed as regular income. On the contrary, the re-invested interest is offered within the cumulative option. This makes these bonds one of the best investment options in India.

   Features of RBI taxable Bonds:

   • The RBI Taxable Bonds have a tenure of 6 years and offer an interest rate of 7.35% per annum.

   • Any individual can invest in this bond with no maximum limit on the amount of investment.

   • Premature withdrawal for senior citizens applies to those who fulfill certain criteria.

   • An investor can receive interest payments in any cumulative or non-cumulative form.

10. Gold ETF

    Gold Exchanged Traded Funds are tools that are a combination of both gold investment and stock. The Gold ETF can be easily bought and, likewise, can be sold with any company stock.

    Therefore, before you lock down a financial instrument, it is advisable to conduct research and get complete and correct information in regard to the product and its position in the market.

    Features of Gold ETFs:

    • Investment in Gold ETFs provides high liquidity, which can be easily traded on the stock exchange.

    • The advantage of deciding the quantum you intend to sell and buy.

    • It can be used as security for secured loans, making the transaction instant.

    • The Gold ETFs are based on the premise of the price of gold, making them transparent when it comes to pricing.

    • When the market-linked tools in terms of risks are volatile, often-higher returns are offered.

11. Pradhan Mantri Vaya Vandana Yojana (PMVVY)

    The Pradhan Mantri Vaya Vandana Yojana is accessible for those senior citizens aged 60 years and up and offers more than 7% of assured returns every year to them. Based on the choice, the scheme provides the pension income, which is due on a monthly, quarterly, semi-annually, or annual basis. At the time of maturity, the amount invested will be paid to the respective senior citizen; however, in the event of the demise of the senior citizen, the amount will then be paid to the nominee, respectively.

    Features of PMVVY:

    • Regular pension for the senior citizen at a regular point in time.

    • When you have the scheme on hold for 3 years, a loan can be taken for 75% of the purchase price.

    • The scheme also offers a free-look period and a secure pension guarantee.

    • The pension amount ranges between Rs. 1,000 to Rs. 10,000 every month. 

    • A maximum of Rs. 15 lakhs can be invested within a tenure of 10 years.

12. Post Office Monthly Income Scheme

    As the name suggests, the Post Office Monthly Income Scheme is a scheme that will help you save money each month and is regulated by the Post Offices within India. It is a government-backed scheme that permits users to save every month. Any Indian citizen can easily open a Post-Office MIS account starting with a minimum of Rs. 1500. 

    Features of POMIS:

    • The investors can open a POMIS account, whether individually or jointly.

    • You can easily open the account jointly with 2 or 3 people.

    • It is possible to earn income every month in the form of interest.

    • The maturity period begins the day the account is opened up to 5 years of the scheme. 

    • This scheme does not provide any tax rebate on either the maturity amount or the investments.

    • You can easily open more than one account in your name and can invest the corpus after maturity in a likewise scheme.

13. Initial Public Offerings (IPO)

    Initial Public Offering (IPO) is generally the offering that new companies make to the public, wherein they can buy shares of the company before it is listed on exchanges. Initially, the rates are low, so the investors keep an eye on the prospective companies that might have the stock's value inflated over time after the listing takes place.

    When the company is listed on the stock exchange, the price of the stocks is changed depending upon the market's conditions, which also affects the company's performance, upcoming trends, management, and various other aspects as well. 

    Features of the IPO:

    • The company gets good talent as it offers a stock alternative.

    • With access to the capital, it is not to be repaid and does not charge interest.

    • It is beneficial for founders of small businesses and venture capitalists wherein they cash out the early investment.

    • When the companies are right, this option could be considered a long-term and low-risk investment option. 

    • IPOs associate risks that need to be figured out before you decide to invest.

14. Real Estate Investment Trusts (REITs)

    A REIT is one of the best investment options. The real estate investment-based company owns and manages high-value land assets, properties, and mortgages to generate income among the shareholders. 

    Features of REITs:

    • The rent collected and appreciated value of the real estate act as the income and dividend of the stakeholders.

    • Both small and big investors can invest their money for stock exchange trading.

    • No tax exemption benefits are available as it is a market-linked high-value investment.

    • Steady dividend income is generated for the investors.

15. Cryptocurrencies:

    Being blockchain technology-secured virtual money, cryptocurrencies are today widely traded in world markets. The best investment options in cryptocurrencies are available in crypto funds, crypto mining, and companies. 

    Feature of Crypto Investments:

    • From 1st April 2022, cryptocurrency trading is charged by the Government of India (GoI) with a 30% tax on profits.

    • Not being a government-backed currency, trading in cryptocurrencies is risky and volatile.

    • Although investing in crypto is not for conservative investors, it bears high profits if all risks are assimilated.

Types of Investment Options

Before starting to invest, it is important to have proper knowledge of different investment plans. As most investors invest based on their risk level (low, medium, or high), let us look at the types of investment options in detail.

1. Low-risk Investments

   These investment options pay a fixed income regardless of economic or business changes. Debentures, bonds, and fixed deposits fall under this category. 

   • Other low-risk investment options such as EPF, PPF, Sukanya Samriddhi Yojana, Senior Citizen Savings Schemes, and National Savings Certificate are government-initiated schemes and offer low-risk guaranteed returns.

   • The returns offered by these investment schemes are periodic and predetermined. 

   • Investors with no volatility in their investment portfolio and a low-risk tolerance should consider investing in low-risk investment options. 

   • Low-risk investment options offer safe and guaranteed returns to investors.

2. Medium-risk Investments

   These investment plans include a certain risk percentage but also pay a higher return to the investors. Medium-risk investment options are best suited for investors with a medium-risk appetite, who want to gain relatively higher returns and a regular flow of income compared to fixed-income securities. Balanced mutual funds, debt funds, and index funds fall under this category. 

   • Even though medium-risk investment options have an element of stability due to debt, their market-linked volatility can hamper the principal amount. 

   • Medium-risk investment options include an element of stability and debt.

   • The volatility associated with the returns can result in the loss of the principal amount. 

   • Due to the market volatility associated with these instruments, getting a regular fixed income is impossible.

3. High-risk Investments

   In high-risk investment options, the returns and risks are directly proportional. These investment plans offer a high Return on Investment (ROI), although the risk associated with them is also on the higher side. Equity mutual funds, stocks of companies, derivatives, and even stocks fall under this category. 

   • Market-savvy investors with a better knowledge of the market have a high-risk appetite and consider investing in these investment options. 

   • Even though under these investment options, there is no cap on gains, the level of risk involved is also very high.

   • Although one can get very high returns on these investment options, it is important to know when to invest money in the volatile market and when to stop and withdraw money with high returns.

Best Investment Plan for 1-Year

If you want to invest for the short-term, say for a year, you should avoid investing in equity options, as they are volatile. Thus, while making a short-term investment, it is very important to make sure that the money you invest is safe, as in the event of market volatility, you will not be able to recover the loss. Here are some of the best investment plans for 1-year in which you can invest for high returns.

1. Fixed Maturity Plans

   These are closed-ended mutual funds, where the investment is made primarily in fixed-income securities with corresponding maturities. The fund managers choose securities that can mature at the same time. The maturity period of a fixed maturity plan ranges from one month to five years. The fixed maturity plans hold the security until maturity and remain uninfluenced by the interest rate, even if it is volatile. The main objective of a fixed maturity plan is to provide a steady return over a period of time.

2. Debt Mutual Funds

   Debt mutual funds are the ideal short-term investment option that is considered one of the best investment plans for 1 year. These are open-ended funds, which are best suited for individuals who have a low appetite for risk. Debt mutual funds are considered one of the safest and best investment plans with high returns because these funds are majorly invested in high-rated debt instruments such as corporate bonds, government securities, and Treasury bills. When compared to any of the regular savings bank accounts, they offer higher returns. Under this fund, the investment is majorly made in securities, which mature between the periods of 6 months and 1 year.

3. Post-Office Term Deposits

   Post Office Term Deposits are also considered as one of the safe and best investment plans for 1 year. The tenure of post-office term deposits ranges from 1 year to 2 years, 3 years, and 5 years. In post-office terms, deposits plan the rate of returns is fixed by the government every quarter and guarantees the investment back. The complete investment incurred towards POTD earns interest on the premise of the prevailing rate. Therefore, when an investor makes a new investment after the release of the new interest rate, the investment will earn returns based on the new interest rate.

4. Arbitrage Mutual Funds

   These mutual fund investors put resources into subsidiaries and money sections with arbitrage chances of the value market and subordinate fragment. As an open-ended fund, this fund is best suitable for individuals who want to avail of tax benefit and wants to stay invested for at least 1 year. Arbitrage mutual funds involve low risk in investment. However, the returns these funds offer are also lower than the other investment options.

5. Recurring Deposits (RDs)

   A Recurring Deposit is best suited for investors looking for a safe investment option and wanting to invest a small fixed sum with the bank regularly. In a Recurring Deposit (RD), the individual receives the lump-sum amount with interest at the end of the policy tenure. This is a lucrative option of investment for the short-term, as it helps the investors to inculcate the habit of saving for the long term.

6. Fixed Deposits

   Fixed deposits are one of the safest and most opulent investment options and are considered one of the best investment plans for 1 year. If an individual has a lump-sum amount in their savings account, they can invest that in a fixed deposit. Bank FDs offer an attractive rate of interest, which is much higher than what a regular savings bank account provides. In addition, the investment made in bank fixed deposits is considered very safe as it is fixed for the chosen tenure, and there is no chance of fraud.

Best Investment Plans for 5 years

Individuals can play it safe with their accumulated corpus with the help of short-term and low-risk investment options ranging from 1-5 years. With the best investment plan for 5 years, a person can invest the money without locking it away for longer. While choosing the best investment plan for 5 years, investors should consider aspects such as liquidity, risk, and tenor. Let us look at some of the best investment plans for 5 years you can consider investing.

1. Liquid Funds

   Also known as, "money market funds,” this type of mutual fund scheme invests the money in short-term government securities and certificates. Under this fund option, the investors can withdraw money whenever they want. This fund is best suited for investors who want to invest for the next 3-5 years. Liquid funds offer a higher interest rate of 7% as the money invested in these funds is mostly invested in money market instruments.

2. Savings Account

   As one of the best investment plans for 5 years, savings accounts are a preferred choice for most people. This investment option offers maximum liquidity to investors, and one can withdraw funds anytime and anywhere without hassle. With an interest rate of 4% savings account is best suited for individuals who constantly need access to all their funds.

3. Post-Office Time Deposits

   These plans are considered one of the best short-term investment plans and the safest option for investment because they provide assured returns to the investors. This plan is offered by the India Postal Service and is highly popular in remote and rural areas of India. The tenure of post-office time deposits ranges from 1-to-5 years, offering high liquidity to the investors. The interest is applied each year to the deposited amount. Let us look at the applicable interest rates for Post-Office Time Deposits accounts.

   Tenure of Account	Applicable Rate of Interest
   1 Year	5.5%
   2 Years	5.7%
   3 Years	5.8%
   5 Years	6.7%

4. Large Cap Mutual Fund

   Another option for the best investment plan for 5 years is large-cap mutual funds, which majorly invest in the stocks of large business organizations intending to gain maximum profit in a short period. This lucrative short-term investment option can provide quick and smart returns to investors with 3-5 years of tenure. Moreover, along with the benefit of high returns of 8%-13% on the investment, this fund also offers the advantage of high liquidity to the investors. As a short-term investment fund, this is best suited for investors who have a low-risk appetite.

5. Stock Market/ Derivatives

   Commodities, shares, and derivatives are profitable options for investors with the good market knowledge and a high-risk appetite. Stock market investments can be short-term or long-term, depending on the investors' financial objectives.

What Should You Do?

Some of the investment options mentioned above offer fixed income, while others are market-linked. While planning to accumulate wealth for the future, it is important to understand the role of both types of investment options.

While market-linked investment options are exposed to the fickleness of the market and generate a high ROI, fixed-income investment options enable you to accumulate wealth so that you can achieve your financial objectives. To achieve your financial goals, be they short-term or long-term, it is very important to make the best use of both investment options. Investments should be made keeping in mind the important aspects such as taxation, risk, and investment horizon.

Conclusion

The thumb rule of making a smart investment is correctly understanding the different investment options available in the market. For most investors, the purpose of the investment may vary depending on the financial objective, period, risk levels, and so forth. Thus, to make money grow, an individual needs to invest in smart investment options that can generate lucrative returns in the long term.

In addition, as an investor, you should not confuse saving and investing. While saving is considered an aloof method of wealth collection, brilliant investment techniques can assist you in creating more wealth.

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