The combination of a low interest-rate regime and high inflation has made fixed deposits (FDs) and other investments unappealing to investors. Today, bank FDs provide a meagre four to 5.5 percent return. Even small savings schemes provide lower returns, adding to investor woes.

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Under such circumstances, experts believe this is the right time for investors to turn to the market – whether it be direct investment or via mutual funds.

According to Adhil Shetty, CEO, Bankbazaar, “Investing in equity allows investors to beat inflation in the long term and mutual funds are the safest and best way to invest in the market. Equity funds in India have generated close to 12-15 percent CAGR over the past 10 years. That’s about six to eight percent above inflation,” Shetty says.

Compounding this annually, Shetty believes, would give a significant amount of wealth over an extended period.

“Unlike earlier, it is not difficult to invest in mutual funds or to track investments anymore. Moreover, there are funds to suit everyone, including the most risk-averse,” Shetty explains.

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“Mutual funds are not just for long-term and medium-term but also for short-term. For short-term investments, liquid funds are a good option. Liquid funds are short-term debt mutual funds where an investor has the option to park one's fund for a few days or months and earn returns for the holding period as per market rates. Liquid funds provide average returns of four to six percent. Liquid funds are invested in short-term money market instruments such as Government treasury bills, money markets, short-term corporate deposits, commercial papers, etc. This makes them very liquid and safe. Moreover, there is no exit load applicable for such a fund. Liquid funds also provide good liquidity of as little as a day,” Shetty said.

Archit Gupta, founder, and CEO, ClearTax suggests investors who find it challenging to pick stocks on their own should consider investing in equity mutual funds as they will benefit from expert money management.

"Equity investments require investors to have an investment horizon of at least five years to mitigate market volatility. Individuals can stagger investments by opting to invest through a systematic investment plan (SIP), which will further reduce the impact of volatility,” Gupta advises.

As per Saurav Basu, head, wealth management at Tata Capital, gold is another instrument to invest in when looking out for an inflation hedge.

"Considering that gold is not very affected by currency rates – the effects of inflation on this tool are almost minimal. The price of gold is also directly proportional to the rate of inflation. Investing through SGB/gold ETF could be a good option," Basu suggests.

Also read: Want to join international mutual funds bandwagon? Benefits and key factors to consider

Apart from investing in these avenues, individuals must also be careful with their investments.

“They need to analyse the fundamentals of the company before investing in its stocks. For all kinds of investments, it's must ensure that investments are in sync with financial goals and risk tolerance," said Gupta of ClearTax.

Disclaimer:

The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.