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11 Best Investment Options in India

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Created on
July 8, 2022


What’s Inside

If I had to ask my parents or someone older about the best investment options in India, they would have three answers from my experience.

  • The first will be in a house, which requires a substantial financial commitment.
  • The second will be gold because that has been more of a generational investment than practical.
  • The third will be the stock market but will be in a very hesitant tone, indicating their disinterest.

While all three are possibly the best investment options in India, there are several more avenues, many of which have always been around but not widely spoken of. And they don’t even require a considerable investment amount, to begin with.

Let’s delve into the details then, shall we?

Best Investment Options in India

Unlike what we might have heard some decades ago, India has multiple investment options. There's something for everyone, from mutual funds and stocks to older forms of investing like FD and RD. 

Here are some of the best investment options available around you.

1. Stocks - The attention-seeking instrument

Think stocks; the first thing that comes to mind is the stock market. Stocks are tradable documents that give you part-ownership of a company. You buy stocks of Zomato, and you’ll be considered part-owner of the company. You will be entitled to vote in important business matters of the company. You can buy or sell stocks every day on the stock exchanges. Companies that perform well give out dividends to their shareholders as a reward for investing and having faith in them.

Another reason why stocks are one of the best investment options in India is the liquidity the possess. Stocks can be easily converted into cash by selling them in the stock market, and the proceeds go into your bank account. They are a valuable instrument to meet short-term goals, but buying and holding stocks for the long haul, say more than five years, has also proven beneficial with solid and positive returns.

2. Bonds - The IOU instrument

Heard of Harvey Specters' famous “IOU”? Bonds are the IOUs of the real world where borrowers issue bonds to raise money and pay a certain interest rate for the bond's duration and promise to pay back the initial principal amount borrowed after some time. 

Different types of bonds offered in India that are considered to be some of the best investment options in India:

  • Government securities bonds are bonds issued during liquidity crises and are meant for long-term investments ranging from 5 to 40 years. They offer mostly fixed interest rates and payout interest bi-annually. 
  • Corporate bonds are issued by companies to borrow money from investors at a fixed interest rate. It is an alternative to a loan and suits investors seeking fixed-interest income for the investment period.
  • Convertible bonds are hybrid bonds that act as a debt and equity instrument but not simultaneously. The bond will convert into a predetermined number of stocks after maturity, and the holder will become a part-owner of the company enjoying the same benefits that other shareholders get.
  • Sovereign gold bonds are government-issued bonds for gold investment without physical ownership. They have an 8-year maturity with a 2.5% interest rate paid periodically. The earned interest is non-taxable.

3. Mutual funds - Your friendly neighbourhood instrument

Arguably considered as one of the most popular and best investment options in India, mutual funds have been the go-to for all novice and experienced investors. A pool of money is collected from many investors, and the fund manager or AMC invest the money into various asset classes. They are classified into several categories: 

a. Based on asset class

  • Equity funds
  • Large-cap
  • Mid-cap
  • Small-cap
  • Debt funds/fixed income funds
  • Balanced/hybrid funds
  • Equity oriented
  • Debt-oriented
  • Arbitrage
  • Solution-oriented

b. Based on the investment objective

  • Growth funds
  • Liquid funds
  • Tax-savings funds
  • Income funds
  • thematic/sectoral funds

c. Based on structure

  • Open-ended funds
  • Close-ended funds
  • Interval funds

d. Based on management style

  • Active funds
  • Passive funds

4. ETF or Exchange-traded funds - The dark horse instrument

They function as a combination of mutual funds and stocks and are hence one of the most underrated best investment options in India. Mutual funds because they invest in a basket of assets, and stocks because you can trade them on the stock exchange. ETFs trade with the help of a Demat account, and you can buy and sell ETF shares as well. They also have popular schemes:

  • Index ETF - which replicates the returns similar to the stock market indices.
  • Bank ETFs - are those that invest in a basket of banks listed on the stock exchange
  • Gold ETFs - look to track the prices of gold and offer similar returns
  • International ETFs - these invest in foreign-based securities and may also track a country-specific benchmark index
  • Liquid ETFs - these invest in a basket of short-term government securities that look to reduce price risk.

5. Gold - The ever-shining instrument

Gold has always been at the top of any list that talks about the best investment options in India. This is simply due to its liquidity and ability to beat inflation. Turbulence often drives up gold prices, although low-price phases are typically short-lived.

Traditionally, people bought physical gold and stored it in banks, selling it when desired. While this method still exists, newer options like gold ETFs and mutual funds have emerged. These methods invest in gold-associated companies, with returns dependent on market conditions. However, storing physical gold can be challenging, and price fluctuations carry the risk of losses.

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Frequently Asked Questions 

1. What are the 4 types of investments?

There are more than just 4 kinds of investments you can make, but here are the 4 most commonly used ones: 

  • Stocks: Where you buy or sell stocks of a publicly-traded company
  • Bonds: Where you lend money to either governments, corporations, or trusts at a certain promised interest rate.
  • Mutual Funds: You and other investors pool some money and invest it in stocks and bonds. 
  • Banking products which include deposits like Fixed Deposits or Smart Deposits. A bank or some other financial institution (NBFC) offers these to give you returns at a fixed rate.

2. Which is the best investment options in India?

It’s hard to say which investment is best for you without knowing what your needs are, but here are some that would qualify as both good and safe investments, largely because they save you tax and also give you good returns:

  • ELSS Mutual Funds - This is a class or type of mutual fund that require you lock in an amount for 3 years at a stretch. Also known as tax-saver funds, these funds give you returns of up to 20% per year. ₹1,50,000 of your income is exempt from tax every year.
  • NPS or National Pension Scheme - this government initiative lets citizens invest in it at regular intervals. A maximum of ₹50,000 per year is exempt from income tax.
  • PPF or Public Provident Fund - Another government scheme that lets you save money into this fund regularly, while being exempt from tax for up to ₹1,50,000 per year.

3. How do beginners invest?

For beginners, low-risk investments with multiple benefits are recommended. Tax-saver mutual funds like ELSS provide good returns and discipline through a 3-year lock-in period. Government-backed options like PPF and NPS are also safe and offer tax benefits.

4. How do I choose from the different investment options available in India?

To choose from the best investment options in India:

  • Consider your financial goals, risk tolerance, and time horizon.
  • Research and compare investment options based on potential returns, risks, liquidity, and tax implications.
  • Seek professional advice if needed and diversify your investments to spread risk.

Ultimately, the best investment option is subjective and depends on your circumstances and preferences.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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