Plenty of misinformation and wrong views being shared here. Here are your options.
Complete and absolute safety. Your only option is
- Government bonds
Keep buying 91 day T-bills and repeat as they mature. They currently yield about 6.4% (annualized). T-bills are guaranteed by the govt so ZERO risk.
If you want to invest for a duration say, more than 91 days, there are 182 and 364 day T-bills as well. Everyweek there is an auction by RBI and you can purchase them here:
If you want to invest for a duration longer than 1 year then you will have to invest in government bonds. Interest is paid every 6 months. The yields depend on the duration of the bonds. Higher the tenure of the bond, higher the return but higher the risk. I had written a bit about that here:
- Invest in a dividend plan of an arbitrage fund but this carries a bit of a risk. So, arbitrage funds, as the name suggest take advantage of the mispricing between cash and derivatives. But the problem here is, if the fund manager doesn’t find arbitrage opportunities, he will move to cash and short-term bonds. Given that there is a drag on returns in case of cash credit risk from the bond portion.
Whatever you don’t invest on dividend plans of debt mutual funds, A DDT of 29% is levied on the dividends.