Financial Instruments in India

Top 5 Financial Instruments in India in 2024

The Indian economic climate provides a wide range of options for investors from all walks of life. From risk-averse beginners to established market players, there is a financial instruments (FI) to suit your goals. But with the sea of options available, navigating this world can be challenging.

There is nothing to worry, we’ve got you covered! This handy guide gives you the top 5 FIs in India for 2024 helping you embark on the journey to financial success.

1. Mutual Funds: Diversification Powerhouse

Mutual funds are top of the list you can invest in as they are the diversification powerhouse. MFs pool money from countless investors and put it in a basket of stocks, bonds, or other assets. This diversification reduces risk and is a huge advantage for those who are careful to put all their eggs in one basket.

Why choose Mutual funds?

  • Professional management: Experts handle investment decisions, freeing you from the burden of stock selection.
  • Wide range of Options: Choose equity funds targeting capital appreciation, debt funds to generate steady income, or hybrid of funds to balance both.
  • SIP Magic: Invest regularly in small amounts (Systematic Investment Plan) to achieve discipline and reap the benefit of your investments.

Things to consider:

  • Choose the Horizon Wisely: Align the fund’s investment strategy (growth, earnings, etc.) with your investment goals and timeline.
  • Cost: Lower rates result in higher returns.

2. Public Provident Fund (PPF): Long-term winner

PPF is a government backed savings scheme appreciated for safety and attractive interest rates. It provides long-term savings, making it ideal for retirement planning or major life goals.

Why opt for PPF?

  • Sovereign Guarantee: Backed by the Government of India, it provides unmatched security for your investment.
  • Tax Benefits: Get tax deductions on contributions and tax-free maturity proceeds under Section 80C.
  • Attractive benefits: Get a steady interest rate on your investment.

Things to consider:

  • Lock-In Period: 15-year lock-in period with limited withdrawal options restricting entry.
  • Investment Cap: There is an annual investment limit, so plan accordingly.

3. National Pension Scheme (NPS): Plan for Your Retirement Today

The NPS is a lucrative pension scheme for those planning for their retirement today. It provides financial independence after retirement. NPS allows for investment in a mix of equity, debt and other assets, providing flexibility and growth potential.

Why Opt for NPS?

  • Retirement Security: NPS provides financial freedom after retirement. It helps to build a huge corpus for your golden years.
  • Tax Benefits: Get tax deductions on contributions and potentially lower tax at the time of maturity corpus.
  • Asset Selection: Select an investment plan that matches your risk capacity and financial objectives after retirement.

Things to Consider:

  • Duration: With specific exceptions, funds are invested until retirement.
  • Market volatility: Equity movements can temporarily distort profitability.

4. Enjoy Tax Saving with Equity Linked Savings Schemes (ELSS)

ELSSs are mutual funds that grow your wealth while saving on taxes. Investments qualify for deductions as per Section 80C, making them a popular choice for tax-aware buyers.

Why Choose ELSS?

  • Dual Benefit: Save taxes and intention for probably high returns via investment in the stock market.
  • Long-Term Wealth Creation: Equity exposure gives the ability for high capital appreciation over the years.
  • Active Management: Fund managers actively manage the portfolio, aiming for most appropriate returns.

Things to Consider:

  • Higher Risk: Equity markets can be unstable, often resulting in losses within the short time period.
  • Lock-in Period: ELSS investments have a mandatory lock-in duration of three years.

5. Sovereign gold bonds (SGBs): A hedge against inflation

Sovereign Gold Bonds ​​is a unique financial instrument provided by the Government of India. It is denominated in grams of gold and offers a guaranteed interest rate with the possibility of capital growth based on the price of gold.

Why choose SGBs?

  • Gold Funds: Diversify your portfolio with valuable assets known for their ability to protect against inflation.
  • Guaranteed Return: Get a fixed interest rate in addition to potential capital growth.
  • Secure Investments: Government-backed, providing security and peace of mind.

Things to Consider:

  • Limited Liquidity: SGBs have a maturity period of 8 years, with limited exit options before.
  • Indirect Investment: You don’t hold physical gold; the returns are based on the gold price.


The Indian FI landscape empowers you to sculpt your financial future. Consider your goals, risk tolerance, and investment horizon. From portfolio diversification (mutual funds) to tax-saving benefits (ELSS, PPF, NPS) and inflation protection (SGBs), there’s a financial instruments for everyone. Start your investment journey today and unlock a world of financial possibilities!

Frequently Asked Questions (FAQs)

Q: Which Financial Instrument is great for novices?

Mutual finances are an extraordinary option for novices. They provide professional management, diversification, and various selections to fit your financial objectives (growth and income). Start with a Systematic Investment Plan (SIP) for a disciplined approach.

Q: Can I invest money in more than Financial Instrument?

Absolutely!  Diversification is the key.  Combine low-risk options like PPF for stability with potentially high return FIs like ELSS for long-term wealth generation.

Q: What if I need my money before maturity?

Liquidity varies across FIs. Equity Linked Savings Schemes (ELSS) have a 3-yr lock-in, even as PPF has a fifteen-year lock-in with restricted withdrawal options. Mutual funds (except ELSS) and SGBs offer more flexibility.

Q: How much investment should I make?

Well, it depends on various factors. Consider your earnings, costs, monetary dreams, and threat tolerance. Start small and gradually boom investments as your consolation level grows.