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5 low-risk investment options during the COVID-19 pandemic

Plant shaped like arrow, Arrow depicting growth

The economic hardship that unfolded due to the Covid-19 pandemic has adversely impacted businesses and individuals worldwide. While companies re-evaluated their operations, individuals had to rethink personal investment in a new light. Being confused about making investments during these times is natural. However, there are a few low-risk investment options that can provide financial security in these uncertain times: 

1. Government Securities Fund

The main advantage of government securities funds is that they are virtually risk-free since the repayment of investor capital is backed by the government itself. They are available as Gilt mutual fund schemes issued by the Reserve Bank of India on behalf of the government. These funds are typically held till maturity and have a long tenure. Offering you the flexibility to cash out the scheme whenever you want, it is a tax-saving option that gives you better post-tax returns than other debt investments.  

2. Index Funds

An index fund is a portfolio consisting of several stocks and bonds with the purpose of imitating a financial market index, albeit on a microscopic scale. Simply put, instead of investing in a particular stock or bond, an index fund lets you invest in the complete market. Since they're highly diversified, they are a relatively low-risk investment that generates a better total return than other funds. Being passively managed funds, they also have the additional advantage of having a lower management fee than actively managed funds. 

3. Liquid Mutual Funds

Liquid mutual funds are a subtype of a debt fund that specifically invest in fixed income instruments such as treasury bills, government securities, commercial paper, among others. These open-ended schemes are an ideal short-term investment option, offering a low return on a limited maturity period (3-6 months). In the absence of a lock-in period, withdrawals from liquid funds can be processed within 24 hours of working days. Another benefit of liquid funds is that no penalty is levied in case you exit or break them. By providing you an option to diversify your portfolio, it posits a good way to invest idle cash.

4. Post office monthly income schemes

A hidden gem for those seeking a steady and stable investment, the post office monthly scheme is an ideal candidate. Boasting of high interest and payout every month, the only limitations to this excellent investment is a 5 year lock-in period and an upper limit (INR 4.5 lacs) beyond which an individual cannot invest in this scheme. But for sheer security, prompt payment, and a no-risk investment, few can stand up to the humble Indian post office monthly income scheme. 

5. Gold

Since time immemorial, this non-reactive, non-corrosive metal has been the standard to which the worldwide economies have tied themselves to. Gold is a low-risk investment with a value that is not only relatively less affected by market shocks but one that also corrects itself sooner. Even for high-risk investors, it is often a good idea to invest in gold to hedge their investments and bring about a degree of security and certainty into their investments. In fact, the frequent lockdowns that the nations of the world are undergoing have served to enhance the value of gold. There are multiple options to investing in gold, including gold ETFs, digital gold, sovereign gold bonds, gold mutual funds, among many others. Each of them carries specific characteristics that make it appropriate for all individuals, however diverse or selective be their investment portfolio. 

With the uncertainty plaguing the market in the wake of the pandemic, it is not a bad idea to revisit your financial management plan. The volatility of the market, pandemic-induced lockdowns, and shift in the supply and demand chain globally, as well as the full-scale shift to remote working, have created a ripple effect in the economy. 

These factors only enhance the uncertainty associated with moderate to high-risk investments while also infusing further instability in the market. A slew of low-risk investments by individuals will not only benefit you by bringing a sense of security to your financial aspirations but also serve to bring about financial stability overall. 



The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.