You might see idle cash sitting in your house locker as just fine, but in reality, it is losing value with time. With each passing year, inflation is making cash lose its purchasing power. To help you avoid this situation, we have compiled a list of six investment options that are not only safe but also offer decent returns.
Best Investment Options for Idle Cash
Here are some of the best investment options you may consider:
FDs and RDs
Fixed Deposits (FDs) and recurring deposits (RDs) are safe investment options offering guaranteed returns with compounding benefits. With FD, you can make lump-sum deposits for tenures up to 10 years. The interest rates vary between 6% and 7.5%, and are slightly higher for senior citizens.
RDs, on the other hand, let you invest a fixed amount monthly for 6 months to 10 years, making them ideal if you prefer regular contributions. Both provide interest on interest through compounding. However, FDs carry premature withdrawal penalties, while RDs require disciplined monthly payments.
Liquid Mutual Funds
Liquid funds are short-term debt mutual funds that invest in money market instruments like repurchase agreements, Treasury bills, certificates of deposit, and commercial paper with maturities up to 91 days. They offer high liquidity, low interest rate risk, and minimal credit risk.
Liquid mutual funds are usually benchmarked against indices like the CRISIL Liquid Debt Index. The annualised returns usually range from 6–7%.
Government Bonds
Government bonds are debt securities that the government issues to raise funds from the general public for infrastructure development or welfare programmes.
When you invest in bonds, you are lending money to the government, which pays periodic interest, called a coupon, for a defined tenure. Government bonds carry minimal default risk, and you can purchase them even in the secondary market.
Public Provident Fund
PPF is a government-backed savings scheme offering a tax-free return of 7.1%. The scheme allows for a minimum investment of just ₹500 per annum, with a maximum threshold limit set at ₹1.5 lakh per year.
However, opt for PPF only if you are comfortable with a 15-year lock-in period. Even during the lock-in, partial withdrawal is allowed in specific situations from the sixth year.
PPF contributions are eligible for Section 80C tax deductions, but only if you are filing returns under the old tax regime.
Overnight Mutual Funds
Overnight funds are ultra-short-term debt mutual funds that park capital in securities with a maturity of only a single business day. Each business day, the fund manager uses the cash to invest in highly liquid instruments, such as government securities or repo agreements, which mature the next day.
Overnight mutual funds offer an average annual return of 5.9–6.4% and have a minimal expense ratio.
Sukanya Samriddhi Yojana
If you have a girl child and want to secure her future, SSY is the safest option. You can open this SSY account if your daughter’s age is below 10. The minimum investment amount here is ₹250 per year, while the maximum annual investment cap is ₹1.5 lakh.
The scheme matures when your daughter turns 21. However, if you need funds to pay for your daughter’s marriage or education, withdrawal is permitted, provided she has attained the age of 18. At present, SSY offers 8.2% of annual interest rate.
Conclusion
While the list of investments mentioned above can help you earn decent returns. You can choose any based on your requirements and goals. Regardless of which investment option you choose, always consider your time horizon, tax liability, and liquidity before deciding.
