Are you looking for better returns than traditional Fixed Deposits (FDs)? While FDs provide safety and assured returns, their interest rates often fail to beat inflation. This makes it essential to explore alternatives that can offer higher returns while managing risk effectively. Many Indian investors still park a significant portion of their savings in FDs and other traditional instruments. However, if you want to maximize your wealth while keeping risks under control, exploring other fixed-income and growth options is crucial. In this article, we’ll discuss 10 best alternatives to FDs, categorized based on risk appetite. Whether you are a conservative investor or willing to take moderate to high risks for better returns, this guide will help you make an informed decision.
Top 10 Best Alternatives to Fixed Deposits [Safe, Moderate & High-Risk Options]
Low-Risk Alternatives to FDs
#1 – Savings Accounts in Small Finance Banks
Small finance banks offer savings accounts with interest rates as high as 7%, providing a great mix of safety and liquidity.
✅ Pros:
- Higher interest rates than traditional savings accounts
- Full liquidity with no lock-in period
- Deposits insured up to ₹5 lakh under DICGC
❌ Cons:
- Interest rates are subject to change
- Some banks require a high minimum balance
- Inflation may erode real returns
#2 – Post Office Savings Schemes
Government-backed post office schemes like NSC and PPF provide stable returns along with tax benefits.
✅ Pros:
- Guaranteed returns with sovereign backing
- Tax benefits under Section 80C (for PPF, NSC)
- Ideal for conservative investors
❌ Cons:
- Limited liquidity due to long lock-in periods
- Interest rates are revised periodically
- Some schemes do not beat inflation in the long run
#3 – Government Bonds & RBI Bonds
Government bonds offer a secure investment option with predictable returns, making them a safe alternative to FDs.
✅ Pros:
- Backed by the government
- Interest rates often higher than FDs
- Some bonds offer tax benefits
❌ Cons:
- Longer lock-in periods
- Interest rate risks for long-term bonds
- Liquidity can be an issue
Moderate-Risk Alternatives to FDs
#4 – Corporate Fixed Deposits
Corporate FDs provide better interest rates than traditional bank FDs but come with slightly higher risks.
✅ Pros:
- Higher interest rates (up to 9%)
- Flexible tenure options
- Some rated corporate FDs are relatively safe
❌ Cons:
- No insurance protection like bank FDs
- Credit risk associated with the company’s financial health
- May not always beat inflation
#5 – Fixed Deposit + Equity Mutual Fund Combo
A balanced approach where your principal is kept safe in an FD, while the interest earned is invested in equity mutual funds.
✅ Pros:
- Capital remains safe in FD
- Allows exposure to equity markets for higher returns
- Helps combat inflation
❌ Cons:
- Equity investments are subject to market risks
- Requires disciplined investing for best results
- Not ideal for those seeking immediate returns
High-Risk Alternatives to FDs
#6 – Peer-to-Peer (P2P) Lending
P2P lending platforms allow investors to lend money to borrowers at higher interest rates.
✅ Pros:
- Returns can range between 10-15%
- Diversification across multiple borrowers
- Potential for passive income
❌ Cons:
- Credit risk—borrowers may default
- Not as strictly regulated as banks
- Requires active monitoring of investments
#7 – High Dividend-Yielding Stocks
Investing in well-established companies with a history of paying high dividends can generate a steady income stream.
✅ Pros:
- Regular income through dividends
- Potential for capital appreciation
- Blue-chip stocks offer stability
❌ Cons:
- Stock market fluctuations affect share prices
- Dividends are not guaranteed
- Requires knowledge of stock selection
#8 – Gold Investments
Gold has always been a reliable hedge against inflation and economic uncertainties.
✅ Pros:
- Multiple investment options (physical gold, ETFs, sovereign gold bonds)
- Hedge against inflation
- High liquidity
❌ Cons:
- No passive income
- Storage and safety concerns for physical gold
- Gold prices can be volatile
#9 – Annuities
Annuities provide a guaranteed regular income, making them a preferred option for retirees.
✅ Pros:
- Assured payouts for life or fixed tenure
- Low-risk investment
- Ideal for retirement planning
❌ Cons:
- Funds are locked in with low liquidity
- Returns may not beat inflation
- High fees and charges may apply
#10 – Systematic Withdrawal Plan (SWP) in Mutual Funds
SWP allows investors to withdraw a fixed amount periodically from their mutual fund investments, offering a tax-efficient alternative to FD interest.
✅ Pros:
- More tax-efficient than FD interest
- Helps generate inflation-beating returns
- Customizable withdrawal frequency
❌ Cons:
- Market fluctuations impact returns
- Requires careful selection of funds
- Not suitable for ultra-conservative investors
Conclusion: Choosing the right alternative to FDs depends on your financial goals and risk appetite. If you prefer safety, government bonds and post office schemes are ideal. For those looking for higher returns, corporate FDs, equity mutual funds, and SWP strategies offer better growth potential while keeping risks in check.
By diversifying your investments and picking the right combination, you can achieve better returns than traditional FDs while managing risks effectively.
💬 What’s your preferred alternative to FDs? Share your thoughts in the comments below!
FAQs
❓ Are corporate FDs safe? Corporate FDs are riskier than bank FDs as they are not insured. Choosing high-rated issuers can minimize risk.
❓ Which is the safest alternative to FD? Government-backed investments like RBI bonds, PPF, and post office schemes are among the safest alternatives.
❓ Can I earn a monthly income from alternatives to FDs? Yes, options like SWP in mutual funds, annuities, and high dividend-yielding stocks can provide regular income.
❓ How do I choose the right investment option? Consider factors like risk appetite, liquidity needs, tax benefits, and expected returns before making a decision.
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Hi sir, ….Reg. Annuities
Scheme Name:– SBI Annuity Scheme — this is in SBI — not in SBI Life.
90% of the staff including managers not aware of this scheme.
I read in Business Line about this scheme .
The example given was. ….If I invest Rs.25 lakhs in this scheme for 10 years,
Rs.29000 would be credited to my a/c from the next month onwards for the next 120 months.
This 29,000 includes part of principal and interest as well. Hence at the end of 10 years, I won’t get anything because part of the principal is also credited to my account along with the interest every month. I think. this scheme is available only for senior citizens. Even after 2 weeks after my enquiry no one including the manager at Chinmaya Nagar branch is not able help me to invest in this scheme. Can you please get me more information on this and where to approach for investment in this scheme? You can write an article on this as well so that the readers are immensely benefited.
The SBI Annuity Deposit Scheme allows individuals to invest a lump sum and receive fixed monthly payouts, which include both principal and interest, for a chosen tenure of 3, 5, 7, or 10 years. By the end of the tenure, the entire principal is repaid, leaving no residual maturity amount. Interest rates are similar to SBI’s term deposits, with higher rates for senior citizens. The scheme is available for all residents (not just senior citizens) and can be opened at any SBI branch or via SBI Internet Banking.
For example, investing ₹25 lakhs for 10 years could yield ₹29,000 per month for 120 months. Premature withdrawal is allowed for deposits up to ₹15 lakh with a penalty, and without a limit in case of the depositor’s death. The interest earned is subject to TDS as per income tax laws. Many SBI staff may be unaware of this scheme, so visiting a larger branch or SBI’s main branch in your city may help. To invest, visit a branch, use online banking, or contact SBI customer support.