11 Best Alternatives to Fixed Deposits for Higher Returns and Financial Growth

Fixed Deposits have been a popular choice among people seeking stable returns and for those who do not like to take any risks. Unfortunately due to changing growing inflation, and growing investment opportunities, it is important to look for alternatives to Fixed Deposits. In this article, we will dive deep into various investment options available in India and talk about their benefits, risks and opportunities for investors of all level. Whether you are a conservative investor, or a person willing to take all the risks, this article is suitable for everyone. However, you should consult a financial advisor before making any decision.

Mutual Funds

The first one in the list is Mutual Funds. Most of you probably know about it already due to plenty of advertisements about it. Are you interested in investing in the stock market, bonds and other securities but worried that investing yourself may result in losses and worried about the scams going on in the stock market? Then Mutual Funds is for you. Mutual funds pool money from multiple investors to invest in stocks, bonds and other securities. Most of the mutual funds have never offered negative returns and are a potential for higher returns compared to fixed deposits.

There are various types of Mutual Funds

Types of Mutual Funds:
Equity Mutual Funds: These type of Mutual Funds invest primarily in stocks and offer higher returns but the risks are also high.
Debt Mutual Funds: These Mutual funds invest in fixed income securities like bonds. They are less risky than Equity mutual funds but keep in mind risks are still involved.
Hybrid Mutual Funds: These Mutual Funds invest in both equity as well as debt mutual funds. This balances the risk and returns.

  • Benefits:
    – Higher potential returns
    – Diversification reduces risk
    – Liquidity – can be easily bought and sold
  • Risks:
    – Market risk
    – Interest rate risk
    – Credit risk

Who Should Invest?
Mutual funds are suitable for investors with a moderate to high risk appetite, looking for higher returns over the medium to long term. Those who are comfortable with market fluctuations and have a basic understanding of the stock market can benefit from mutual funds.

How to Get Started:

To invest in mutual funds, you can contact your bank for the process or create a demat account directly invest through it. You can choose to invest a specific amount or opt for monthly payments plan also known as SIP.

Public Provident Fund (PPF)

The next in the list is Public Provident Fund also known as PPF.  It is one of the best alternative to fixed deposits as it also offers guaranteed returns. PPF is also a conservative way of growing your funds. It is backed by the Government of India and offers an attractive interest rate. It is a good choice for those who want to save taxes but keep in mind the limit is only upto 1.5 lakhs INR every year. It is suitable for investors looking for a safe and stable investment option.

– Guaranteed returns
– Tax benefits under Section 80C
– Tax-free interest

– Lock-in period of 15 years
– Limited liquidity

Who Should Invest:

PPF is ideal for those who want to save taxes, and are willing to forget the money for 15 years that is not in urgent need of the money for at least 15 years. It is great for individuals planning for retirement or for long term goals such as buying a house.

How to Get Started:

You can open a PPF account through any Bank or post office. Then minimum investment amount is INR 500 and the maximum is INR 1.5 lakh.

National Savings Certificate (NSC)

NSC is a government-backed fixed income investment scheme. It is suitable for conservative investors seeking secure returns with tax benefits.

– Guaranteed returns
– Tax benefits under Section 80C
– Low risk

– Fixed tenure
– Limited liquidity

Who Should Invest:
National Savings Certificate is best for conservative investors who are looking for a safe investment opportunity with tax benefits. It is a great option to diversify your fixed income portfolio and one of the best alternative to fixed deposits.

How to Get Started:

Registering in this scheme is a simple process. You need a minimum investment amount of INR 100 and there is no maximum limit. You can register for it at any post office in India. It is important to note that there is a fixed tenure of five to ten years for this scheme.

 Recurring Deposits (RDs)

Recurring Deposits is another conservative alternative to Fixed Deposits. It is suitable for those investors who want to save a fixed amount regularly and earn interest on it. It is an ideal option for salaried people to build a corpus over time.

– Guaranteed returns
– Flexibility in investment amount
– Suitable for disciplined savings

– Lower returns compared to other investment options
– There is a premature withdrawal penalties

Who Should Invest:
RDs are suitable for individuals with a steady income who want a regular saving habit. It is also a good option for those who are new to investing and want to start with a low-risk option.

How to Get Started:

You can visit any bank account or a post office to open an RD account. The tenure for an RD ranges from six months to ten years. The minimum deposit amount is different for every institution so consult the institution for it. The amount is usually low though.

Corporate Fixed Deposits

Corporate FDs are similar alternative to fixed deposits but are issued by companies. They have a higher interest rate compared to the regular fixed deposit but have a higher risk too. So make sure you open a corporate deposit only with a trusted company.


  • Higher interest rates
  • Fixed tenure


  • Credit risk
  • Lower liquidity
  • No insurance cover like bank FDs

Who Should Invest: Corporate FDs is not for those who are conservative. It is an option for those who are willing to take risks. Make sure to do thorough analysis of the company too before investing.

How to Get Started: To invest in corporate FDs, you need to apply directly with the issuing company or through an authorized distributor. The minimum investment amount and tenure may vary by company.


Bonds is another option for conservative investors as it is issued by the government of India. It gives periodic returns.

Types of Bonds:

  • Government Bonds: Low risk, suitable for conservative investors.
  • Corporate Bonds: Higher returns with higher risk.
  • Tax-Free Bonds: Interest is tax-free, suitable for high-income individuals.


  • Regular income through interest payments
  • Lower risk compared to equities
  • Variety of options to suit different risk profiles


  • Interest rate risk
  • Credit risk
  • Liquidity risk

Who Should Invest: Bonds are best for those who want a higher return with lower risk. So, conservative investors usually go for this option. It has a manageable risk and is considered less risky than Equity.

How to Get Started: You can invest in bonds through primary markets during new issues or secondary markets through stock exchanges. Some bonds are also available through mutual funds and exchange traded funds.

Post Office Monthly Income Scheme (POMIS)

Post Office Monthly Income Scheme is one of the best alternative to Fixed Deposits as it is backed by the government of India and offers guaranteed returns. It is ideal for those seeking regular income.


  • Guaranteed monthly income
  • Low risk
  • Capital protection


  • Interest rate risk
  • Premature withdrawal penalties

Who Should Invest: POMIS is perfect for retirees and those seeking a reliable monthly income. It is a good option for conservative investors.

How to Get Started: You can open a POMIS account at any post office. The minimum investment amount is INR 1,500, and the maximum is INR 4.5 lakh for a single account and INR 9 lakh for a joint account. The scheme has a tenure of five years.

Stock Market Investments

This is one of the worst option for conservative traders due to the high risks involved. It offers high returns but potentially high risks. If you are new to the market, we recommend staying away from it or taking advises from highly skilled registered financial advisors. Please keep in mind that more than 90% people in India make losses investing in stocks.


  • High returns potential
  • Liquidity – stocks can be bought and sold easily
  • Dividend income


  • Market risk
  • Volatility
  • Requires market knowledge and research

Who Should Invest: It is not a good option for conservative investors. If you are young and risk tolerant, this could be an option for you. However, a registered financial advisor is strongly recommended before making any choice for it.

How to Get Started: To invest in the stock market, you need to open a Demat and trading account with a broker. Groww, Kotak Securities are a few good options to get started with.

Real Estate

Real estate is not the best alternative to fixed deposit as the funds are not liquid. Investing in it involves buying and selling properties or earning rental income from property value. It is a popular investment for wealth generation.


  • Potential for high returns
  • Rental income
  • Tangible asset


  • High initial investment
  • Illiquidity
  • Maintenance costs

Who Should Invest: Real estate is for those who have a lot of capital and are looking for a long term investment option. It is a good option to diversify your portfolio with a tangible asset.

How to Get Started: Investing in real estate requires significant capital. You can start by researching the areas, potential for growth etc. A chartered accountant can help you with this.

Gold Investments

Gold has been an old traditional investment option and a favourite choice in the Indian families. It is considered a good choice for wealth preservation. There are various ways to invest in it like physical form, gold ETFs, and sovereign gold bonds.


  • Hedge against inflation
  • Liquidity – can be easily bought and sold
  • Safe haven asset


  • Price volatility
  • Storage and insurance costs for physical gold

Who Should Invest: It is a good option for those who want to preserve their capital and diversify their portfolio. It is ideal for investors looking to hedge their portfolio.

How to Get Started: Investing in gold is pretty simple, you can simply buy it from a jeweller or buy an ETF or sovereign bond. Keep in mind due to the scams in the market, always choose a trusted and registered source.

Peer-to-Peer (P2P) Lending

P2P lending platforms connect borrowers with investors. It offers higher returns as compared to other conservative options.


  • Higher returns
  • Diversification across multiple borrowers
  • Monthly repayments


  • Credit risk
  • Platform risk
  • Limited liquidity

Who Should Invest: P2P lending is ideal for investors looking for higher returns and willing to take on the risk associated with lending to individuals. It is a hefty process and requires a lot of struggle in India and therefore is not one of the best alternative to fixed deposits in India.


While there are many good alternatives to Fixed Deposits, it is important to get your risk tolerance evaluated through a registered financial advisor to make sure whether the options actually suit you. Fixed deposits offer safety and guaranteed returns but there are other safe returns options available like PPF which come at the cost of a lock-in period of 15 years. Exploring the various investment options can potentially enhance returns and offer better financial growth. Diversifying your portfolio across different assets can help manage risk and optimise returns.

For conservative investors, PPF, NSC and government back bonds and schemes provide safety and steady returns, however if you are willing to take risk, mutual funds, corporate bonds and real estate are a few ways to grow your wealth.

Always consult with a financial advisor to tailor an investment strategy that aligns with your personal financial objectives.

Frequently Asked Questions (FAQs)

Q1: Are mutual funds riskier than fixed deposits?

Yes, Mutual Funds are subject to market risks and are highly risky. Therefore it is advised to do a thorough research to choose which Mutual Funds is best for you for your needs. Mutual Funds also do not offer Guaranteed returns unlike Fixed Deposits. Make sure your Mutual Fund is also registered with SEBI. You can verify the registration of the Mutual Fund on SEBI’s official website.

Q2: Can I withdraw my PPF investment before maturity?

No, you cannot withdraw your PPFs as they have a lock in period of 15 years. Partial withdrawals are allowed after 5 years. So, it is recommended not to invest any money you may need urgently during this time. You may also be able to get loans against your PPFs.

Q3: What is the minimum investment amount for corporate fixed deposit

Every company has a different requirement so you should check with the company you are interested in. The minimum amount is usually INR 10,000.

Q4: How is the interest on bonds taxed?

Interest on bonds is taxed the same way as investor’s income tax slab, except there are tax-free bonds which are exempt from tax generated by interest.

Q5: Is real estate a liquid investment?

No, Real estate is considered illiquid because it takes time to sell a property and convert it into cash.

Q6: What are the charges associated with ULIPs?

– There are several charges associated with ULIPs  which include premium allocation charges, fund management charges, policy administration charges, and mortality charges.

Q7: How do P2P lending platforms manage credit risk?
– P2P lending platforms assess the creditworthiness of borrowers and assign them risk grades to help investors make informed decisions.

By carefully weighing the pros and cons of these alternatives to fixed deposits, investors can make more informed decisions to achieve their financial goals. However, it is important to consult a financial advisor before making any choice. Everything listed in this article is only for educational purposes. Final choice should be made with a registered financial advisor.


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