Different Types of Investments in India (2026): Risk, Returns and Examples

Most of us start investing by copying others: a friend’s FD, a cousin’s mutual fund, a neighbour’s LIC, or a colleague’s SIP suggestion. But here is one important thing! What works for one person may not work for you. The real questions are: what are your goals, and which types of investments suit those goals? 

This blog explains the different types of investments in India, along with their risks, returns, lock-in periods, and the kind of investors they are best suited for.

Different Types of Investments in India with Risk, Return, and Tax Benefits (2026)

Explore the various investment options in India to find the right balance between risk, returns, and your financial goals.

Types of Investments	Risk Level	Liquidity	Return Potential	Lock-In / Tenure	Tax Benefits
Stocks	High	High	High	No lock-in	Taxable (LTCG/STCG)
Mutual Funds (Equity)	Moderate-High	Moderate-High	Moderate-High	No fixed lock-in	80C (ELSS funds only)
ETFs	Moderate	High	Moderate	No lock-in	Taxable
Fixed Deposits	Low	Low-Moderate	Low	7 days to 10 years	5-year FDs eligible
Government Bonds	Low	Low	Low-Moderate	1 to 30 years	Taxable / SGB exempt
NPS	Low-Moderate	Low	Moderate	Till retirement	80C + 80CCD(1B)
PPF	Low	Low	Moderate	15 years	80C + interest exempt
Gold (Physical/SGB/ETF)	Low-Moderate	Moderate	Moderate	SGB – 8 years (early exit after 5)	SGB interest taxable
Real Estate	Moderate	Very Low	Moderate	Illiquid	Depends on ownership
REITs	Moderate	High	Moderate	No lock-in	Taxable
ULIPs	Moderate	Low	Market-linked	5 years minimum	Section 80C
Derivatives (F&O)	Very High	High	Very High	Short-term contracts	Taxable
Commodities (via futures/ETFs)	High	Moderate	High	Short to medium term	Taxable
Annuities	Low	Very Low	Low	Long-term	Depends on the plan

Compare ETF vs Mutual Fund and choose the right investment option!

Types of Investments in India: What Each One Offers and Who It’s For

Not all investments are built the same, and in India, you have more options than most people realise.

1. What are Equity-Based Investments

Equity investments give you ownership in a company and allow you to participate in its growth. These are market-linked instruments that can be volatile in the short term but have historically delivered strong long-term returns.

Over the past decade, Indian equity indices like the Nifty 50 have delivered roughly 10–12% annualised returns over 10-year periods (market cycle dependent). This is why equity is often considered suitable for long-term wealth creation and beating inflation.

Here are the various types of Equity Investments:

• Direct Stocks: Shares of listed companies traded on NSE or BSE. Investors earn through price appreciation and sometimes dividends.
  
• Equity Mutual Funds: Professionally managed funds that invest in diversified stock portfolios. Available as active or passive (index) funds.
  
• ETFs (Exchange-Traded Funds): Market-traded funds that track indices or sectors and offer low-cost exposure.
  

To start investing in the stock market, open a free demat account with an investment app in India!

Note: Equity investments are suitable for investors with a high risk tolerance and a time horizon of 5–10 years or more.

2. What Are Debt Investments?

Debt investments involve lending money to governments or companies in exchange for interest. The focus is on capital preservation and steady income, rather than high growth.

In 2026, RBI interest rates have stabilised after previous tightening cycles, and deposit rates remain competitive. However, bond prices continue to react to inflation trends and policy signals, making interest rate risk an important factor.

What are the Common Debt Investment Options?

• Fixed Deposits (FDs)
  • Returns: Fixed, currently aligned with prevailing bank rates
  • Risk: Low (depends on bank/NBFC strength)
  • Ideal For: Conservative investors seeking predictable income
    
• Government Bonds (G-Secs, T-Bills, SGBs)
  • Returns: Moderate, sovereign-backed
  • Risk: Low credit risk, but sensitive to rate changes
  • Ideal For: Long-term stability seekers
    
• Corporate Bonds / NCDs
  • Returns: Higher than government bonds
  • Risk: Credit risk based on issuer rating
  • Ideal For: Income-focused investors comfortable with moderate risk
    
• Debt Mutual Funds
  • Returns: Linked to interest rate cycles
  • Risk: Interest rate and credit exposure
  • Ideal For: Short- to medium-term allocation and portfolio balance

1. What Are Hybrid Investments?

Hybrid investments are a mix of equity and debt, designed to balance growth and stability within a single product. They aim to reduce volatility compared to pure equity while offering better return potential than fixed income alone.

• Balanced / Hybrid Mutual Funds: Invest in both stocks and bonds.
  It is ideal for moderate-risk investors seeking steady growth with lower volatility than pure equity funds.
  
• Arbitrage Funds: Exploit price differences between cash and futures markets.
  It is lower risk compared to equity funds and is often used for short-term parking with tax efficiency.

4. Physical & Tangible Assets

These are physical or value-backed investments.

• Real Estate

Property investment in residential or commercial assets.

Pros:

• Rental income potential
• Long-term appreciation

Cons:

• Illiquid
• High capital requirement

Best Use: Long-term wealth building and asset diversification.

• Gold

Can be held physically or digitally.

• Physical Gold: Jewellery, coins, bars
• Gold ETFs / Funds: Track gold prices, liquid
• Sovereign Gold Bonds (SGBs): Offer interest + price appreciation

Pros:

• Hedge against inflation
• Portfolio stabiliser

Cons:

• Does not generate regular income (except SGB interest)

Best Use: Risk diversification and inflation protection.

5. What are the Retirement & Government Schemes Available

Long-term savings instruments offer safety and tax benefits.

• PPF (Public Provident Fund): 15-year government-backed savings plan; eligible under Section 80C.
  
• NPS (National Pension System): Market-linked retirement scheme; tax benefits under 80C and 80CCD(1B).
  
• EPF (Employees’ Provident Fund): Mandatory salaried retirement savings; employer contribution included.
  
• SCSS (Senior Citizens Savings Scheme): Fixed-return plan for retirees; offers capital protection.
  
• SSY (Sukanya Samriddhi Yojana): Long-term savings scheme for a girl child; eligible under 80C.
  

Best Use: Retirement planning, tax-efficient long-term savings.

6. What are Alternative Investments

These go beyond traditional stocks and bonds.

• REITs: Buy shares of income-generating real estate portfolios.
  
• Commodities: Exposure to gold, oil, metals, or agriculture via futures or ETFs.
  
• Derivatives: Contracts based on price movements of stocks or indices; used for hedging or trading.
  
• Annuities: Insurance products providing regular post-retirement income.

How to Choose the Right Investment Type

The above-listed types of investments serve different purposes: growth, income, stability, or diversification. Each option carries its own risk, return potential, and liquidity profile.

Choosing the right investment depends on:

• Your financial goal (retirement, short-term savings, wealth creation)
• Your time horizon (1 year vs 10+ years)
• Your risk tolerance (comfort with market fluctuations)

Instead of relying on a single category, a balanced mix of asset types can help manage volatility and improve long-term outcomes.

To understand how combining assets reduces risk, learn about diversification in investing.

Different Investment Options- FAQs