Low-risk investments help protect your capital while delivering stable, predictable returns through options like fixed deposits, government-backed schemes, and low-risk mutual funds. Explore this guide to understand the best low-risk investment options in India and what to consider before investing.
Not every investment decision needs to chase high returns or ride market volatility. For many investors, the priority is simpler: to protect capital, earn steady returns, and avoid unnecessary risk. Low-risk investments serve this purpose by offering stability, predictable income, and peace of mind, especially during uncertain market conditions.
In this blog, we explore a range of low-risk investment instruments and funds, along with the key factors to consider before investing in them.
Why Choose Low-risk Investments?
Low-risk investments let your savings grow while putting your principal at minimal risk. They offer steady returns that aren’t affected by market swings, so you can invest without constant monitoring. Other features of opting for low-risk investments include:
- Capital protection: Your savings remain safe without the fear of losing your principal.
- Stable returns: It ensures that returns relatively predictable, though new investments may be affected by factors such as changes in the repo rate, providing steady earnings without any issues.
- Less stress: You don’t need to track your portfolio every day or worry about sudden downturns.
- Beginner-friendly: Perfect for new investors who want to build habits without high risk.
Once you understand why low-risk investments matter, the next step is knowing where to invest. The capital and money market of India offers several low-risk instruments that balance capital safety with reasonable returns.
Top Low-risk High-return Investments in India
The investment options below provide stability, reliable returns, and peace of mind, making them ideal for you.
Note: The interest rates mentioned in this section reflect prevailing market levels as of February 2026 and are subject to change over time.
- Investment-grade corporate bonds
Investment-grade corporate bonds are bonds that carry credit ratings from AAA to BBB-. These bonds are issued by financially stable companies. They are considered safe because the three-year default rate of these bonds falls under the range of 0% to 2.21%. Typically, investment-grade corporate bonds can deliver 8% to 14% returns, making them a suitable low-risk, high-reward investment option.
- Fixed deposits (FDs)
Fixed deposits are the classic choice for risk-averse investors. They offer assured returns, flexible tenure, and protection from market volatility. Many private banks and NBFCs provide interest rates between 6% to 7.5%, with senior citizens often receiving an additional 0.5% interest.
You can earn returns of up to 8% on fixed deposits by investing in high-yield FDs offered by small finance banks partnered with Jiraaf.
- Government securities
Government securities or G-secs are sovereign debt instruments consisting of government bonds, municipal bonds, state development loans, treasury bills, etc. These bonds are considered almost risk-free as the government of India backs them. Since the risk is very low, the returns are also less when compared to the bonds issued by private companies. G-secs can be considered short-term as well as long-term securities as their maturity period may range from 91 days to 30 years.
- RBI floating rate savings bonds
The RBI floating rate savings bonds are issued directly by the RBI on behalf of the government of India. These bonds are offering 8.05% interest, with interest being paid semi-annually. The interest rate of these bonds is linked to the NSC rate + 0.35%, so your returns rise whenever NSC rates increase and vice versa. The RBI floating rate savings bonds have a 7-year lock-in, and while returns are taxable, the sovereign guarantee makes them almost risk-free.
- Public provident fund (PPF)
PPF is a government-backed savings scheme with a 15-year lock-in period, making it ideal for long-term planners. The interest rate on PPF stands at 7.1% and is revised every quarter. Additionally, PPF enjoys EEE (Exempt-Exempt-Exempt) tax status, meaning both the investment and the returns are tax-free.
- Senior citizens’ savings scheme (SCSS)
The SCSS is a customized plan for retirees that offers safety and good returns. It ensures a dependable stream of income. It offers an attractive 8.2% interest rate, paid quarterly, with an investment limit of up to ₹30 lakh. Premature withdrawal is permitted, though it attracts a small penalty.
While investing directly in bonds, deposits, or government schemes may work well for many investors, some prefer a more flexible and diversified route.
Best Low-risk Investment Funds in India
An alternative to investing in low-risk instruments is to invest in a fund rather than an individual security.
Note: The return ranges mentioned below are indicative estimates based on historical performance trends and prevailing market conditions as of February 2026.
- Debt mutual funds
Debt mutual funds invest in high-quality corporate bonds and government securities, typically across short to medium durations. They aim to deliver stable, predictable returns, which can be more tax-efficient than fixed deposits when held over longer periods. These funds offer 6% to 7% returns on a 3-year period.
- Liquid mutual funds
Liquid mutual funds invest in high-quality, short-term debt securities such as treasury bills, commercial paper, certificates of deposit, and short-term corporate bonds, all with maturities of up to 91 days to 182 days. These funds offer 7.5% to 8% returns.
- Money market mutual funds
Established asset management companies manage these funds. They invest in high-quality, short-maturity fixed-income securities with minimal credit risk and offer 6.5% to 7.5% over a 3-year period. Because price and default risks are low, they’re a practical option for investors looking to park surplus cash.
With multiple low-risk instruments and funds available, the right choice ultimately depends on your financial goals, time horizon, and liquidity needs. A few key considerations can help you align these options with your portfolio.
Things to Consider While Choosing the Best Low-risk Investment Plan for Your Portfolio
Choosing the right low-risk investment is about finding the right balance between safety, liquidity, and your financial goals.
- Define your goal & timeline
– Short-term (1–3 years): You can opt for investment-grade corporate bonds or FDs
– Long-term (5+ years): May opt for PPF, NSC, SCSS, or G-secs
- Check liquidity needs
– If you need a regular income, you can consider a money market mutual fund or a liquid mutual fund
– If you can lock in funds, PPF and NSC provide stable growth
- Tax benefits
– If you want to save on taxes, PPF, NSC, and SCSS offer Section 80C deductions under the old tax regime
– Tax-free returns (like PPF’s EEE status) can boost real gains
By weighing safety, returns, and your goals, you can steadily grow your money without unnecessary risk.
Final Thoughts
While low-risk investments may not deliver rapid growth, they provide stability, predictability, and protection against downside risk. A measured allocation to sovereign-backed bonds for security, complemented by corporate instruments for incremental yield, brings structure to the portfolio without compromising caution.
When chosen thoughtfully, these low-risk investment instruments help preserve wealth, generate a steady income, and support long-term financial planning.
