Investment: Forget fixed deposits! Invest your money here in the new year for lower risk and higher returns..

With the arrival of the New Year, most people set new financial goals. Some seek safe investments, while others seek better returns. For years, fixed deposits (FDs) have been the preferred choice for investors, but now the situation is changing. Declining bank interest rates have diminished their attractiveness. Therefore, the question arises: where to invest money other than FDs, where the risk is lower, and the returns are better. At the beginning of the new year, we are telling you about two investment options that can show you a way forward.

Why are you now tired of FDs?

Investing in FDs is considered easy and safe, but since the repo rate has been steadily decreasing over the past few years, FD interest rates have also been decreasing. Most banks offer 5 to 6.5 percent or so interest on FDs. When inflation and taxes are factored in, the actual return becomes even lower. This is why investors are now looking for options that keep their money safe and yield a little more.

First Option: Corporate Fixed Deposit

When banks need money, they borrow from the public through fixed deposits. Similarly, large, established companies also borrow money from the public for their business. This is called a corporate FD.

What are the benefits?
The biggest advantage of a corporate FD is its higher interest rate. It typically offers 1 to 3 percent higher returns than bank FDs. While bank FDs offer interest rates of up to 6.5 percent, FDs from reputable companies can offer returns of 8 to 9 percent.

It has a maturity period of 1 to 5 years, and like bank FDs, the returns are pre-determined. Market fluctuations do not directly impact it.

What is the risk?

The biggest risk with a corporate FD is the company's default. If the company gets into trouble, investors' money could be lost. While bank FDs offer insurance on deposits up to Rs 5 lakh, corporate FDs offer no such guarantee.

How to make a safe investment?

Always choose companies with a good credit rating. Before investing, be sure to review a company's track record over 10 to 20 years. Investing in companies that consistently generate profits and have an AAA or AA rating is considered safer.

Second Option: Debt Mutual Funds
Debt mutual funds are a type of mutual fund. In these, the fund manager collects money from many investors and invests it in fixed-income instruments like government bonds, corporate bonds, and treasury bills. Simply put, your money is not invested in one investment, but is distributed across multiple safe assets.

What are the benefits?
The biggest advantage of debt mutual funds is diversification. Your money is invested in multiple bonds, which reduces the impact of a single company's collapse. Although returns are not guaranteed, historical data show that debt funds can deliver better returns than FDs over the long term. Generally, returns of 7 to 9 percent can be expected. If you invest for more than 3 years, you also get indexation benefits, which significantly reduce the tax burden.

Which option is right for whom?
If you want fixed returns and are willing to take a little more risk, a corporate FD may be right for you.
If you want better returns than FDs while saving tax and can tolerate some volatility, debt mutual funds may prove to be a better option.

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