Which Investment Option Offers Guaranteed Return as Compared to Debt Fund?

It is said that smart investment planning is the key to achieve the financial objectives of life. With an extensive range of investment options available in the market, it is imperative to choose the right one. So, you can create a financial cushion for the future and meet the ultimate financial goals. Choosing the investment option which offers guaranteed return can seem to be a herculean task.

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7.7 Crore

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Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

So, in order to help you out, here we have elaborately discussed the investment options, which offer guaranteed returns as compared to debt funds.

Types of Investment Plans

Life Insurance

Life insurance is considered as one of the best investment options as it not only provides life cover to your family in case of an eventuality but also helps you to accomplish long-term and short-term financial objectives.

Life insurance plans offer two types of investment options i.e. ULIP plans and traditional plan. Unit Linked Insurance Plans offers investment returns based on the market performance of the fund, whereas, traditional plans offer regular or lump-sum payment as maturity benefit. You can consider investing in the traditional plan in order to avail assured returns depending on your investment amount, insurance goal, risk appetite, and investment horizon.

Moreover, apart from the guaranteed returns, both types of investment plans offer tax benefit under Section 80C and Section 10(10D) of Income Tax Act 1961.

Fixed Deposit

Fixed Deposits are considered as one of the safest investment options which offer a guaranteed return on investment. As one of the best long-term investment option, the interest rate in fixed deposits ranges from 7-8% and remains the same for the entire tenure of investment. Based on banks, FD offers non-cumulative and cumulative investment option. The cumulative option enables you to create corpus over a long-term as it offers the extended benefit of compounding, whereas, in non-cumulative option, the interest is paid as per the underwriting and it helps you to get the regular payout.

As compared before, the returns in guaranteed plans have increased historically. Thus, in today’s day and age, the returns generated by guaranteed income plans are similar to banks FD and is considered as a lucrative option of investment for conservative buyers.

Public Provident Fund (PPF)

PPF is known as one of the most lucrative option investments as it offers the benefit of fund protection and guaranteed returns which are totally exempted from taxes. Public Provident Fund provides you an opportunity to create a corpus for the future so that you can secure life after retirement. You can start investing in PPF with a minimum amount of Rs.500 and can invest up to maximum Rs.1, 50,000 in a financial year. PPF also offers the loan facility between a 3^rd year to the 6^th year of investment. This investment option not only offers guaranteed returns on investment, but the interest rate in a PPF account is higher as compared to bank FDs and RDs.

Debt Fund

As a lucrative option of investment, the major objective of a debt fund is to generate capital appreciation for the investors throughout the investment tenure. As debt fund is managed by the Securities and Exchange Board of India (SEBI) it provides certain security. However, debt fund does not offer any guaranteed returns, as it totally depends on the market performance of the fund. Moreover, if we make a comparison of tax benefit on debt fund and traditional product then we can see that, in traditional products tax benefit can be availed under Section 80C of IT Act 1961. On the other hand, the debt funds which are held for more than 36 months are taxed 20% with indexation and are classified as a long-term capital gain.

However, with the higher risk involved in investment, the ROI offered by debt funds are also high as compared to bank FDs. Thus, it is a great option of investment for investors who have a high-risk appetite and are non-conventional buyers.

Comparison Chart of Traditional Guarantee Return Plans and Debt Funds

Basis	Traditional Guaranteed Return Plans	Debt Funds
Objective	Helps to get money back faster and also secures the future of you and your family financially.	It is purely for the investment purpose and helps to create wealth in the long-term.
Investment Returns	Depends on the type of investment	Highly volatile, totally depends on the market performance of the fund.
Tax Benefit	Offers tax benefit U/S 80C and 10(10D) of Income Tax Act.	The debt funds which are held for more than 3 years are taxed 20% with indexation and are classified as a long-term capital gain.
Flexibility	Offers low flexibility	Offers high flexibility.
Security	Offers high security because of guaranteed returns	The investments made in debt funds are not secured and does not offer guaranteed returns.
Which is Better	Traditional investment plans are best in term of guaranteed returns and financial security.	Debt funds are best only in terms of investment. Even though the fund offers a higher return on investment, the returns totally depend on the market performance of the fund.

Wrapping it Up!

Earning money may be tough, but it is even tougher to make an investment in the right way and wisely. It is important to keep in mind that the investment made in a long-term reaps maximum returns as compared to the short-term investment. Thus, if you are looking for the right investment option which offers guaranteed returns as compared to debt funds, then you can consider investing in these Guaranteed plans.

Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer. Tax benefit is subject to changes in tax laws. *Standard T&C Apply

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-12-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).