Investing for Guaranteed Returns — A good or bad financial decision?

financialexpress.com:

Guaranteed return products such as fixed deposit (FD), public provident fund (PPF) and government bonds are a popular choice among Indian investors. These schemes offer you a fixed lump sum amount, a mandatory commitment for a predetermined period, and an assured fixed rate of interest. Investors enjoy the security of a guaranteed rate of return, with certain options offering additional tax benefits.

While guaranteed return products play a crucial role in balancing a high-risk portfolio, relying solely on these investments may lead to suboptimal wealth creation. The returns generated from such products tend to be modest, and in some cases, they may not be the most tax-efficient.

Investors often grapple with the decision of whether to pursue guaranteed returns or opt for riskier, potentially higher-yielding investments. Let us find out whether investing in guaranteed return products is a good or bad financial decision.

Investing in financial instruments that promise guaranteed returns can be appealing for several reasons. Stability and predictability are paramount in a market characterised by volatility. For conservative investors, the assurance of receiving a predefined return on investment provides peace of mind. Guaranteed returns can be particularly enticing during economic uncertainties or when market conditions are unpredictable. This conservative approach aligns with the principle of capital preservation, which is essential for those looking to safeguard their investments.

Also Read: Tax-Smart Retirement Planning: Tips for a Secure Financial Future

While guaranteed returns ensure safety, there are inherent downsides that investors must consider. One of the most significant drawbacks is the potential for lower