I was having a conversation with my cousin's son who was about to join his first company. So I casually asked him what is his career aspirations, and he said that he wanted to go abroad for higher studies. This will take 2 years at least and thus he wanted to save and invest so that there will be not much burden on him afterwards. He asked me about his suggestions for some low-risk investments for starting. Nowadays a lot of youngsters are actually seeking investment advice which is quite good because for them the future looks so bright.
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Since he needs money in another 2 years then it's always better to go with some low-risk investment. Because you never know which direction the market will go in another 1 year or so. So I gave him some suggestions like:
Today fixed deposit is one of the most attractive investments because of the interest rate. The interest rate which was around 5% or less than that some days ago is now moving towards 8%. I have opened a couple of fixed deposits for my emergency fund at 7.5% interest. I would not recommend FD for investment purposes but if your timeline is 0-3 years then FD is the best as of now because of its attractive interest rate. I have also renewed some of my old FDs with less interest rates to the new ones with High-interest rates all because of getting that extra return.
Though debt funds still have to pick up the interest rate as per the fixed deposit still seems to be a good option for low-risk investments. In fact, it is best for people having high income because if you keep it for 3 years or more, the tax you will pay on it will be quite less than the FD. For new investors, you do not have to think about the tax much. Still, a debt fund is quite good if you are thinking of starting some low-risk investment.
Some bonds have a fixed timeline and thus you have to find out the tenure. It seems to give better returns than the FD as well as it is low risk because it directly comes from the government itself. It is like you are giving a loan to the government and in return, the government will pay you some fixed interest.
I know investing in equity for 2 years doesn't make sense but what if you go through the ETF route or index funds route? This again is ok to some extent, but again if you have some funds which you don't require now can go through these routes because they are pretty less risky.
