The choice of the best investment options for you will depend on your personal circumstances as well as general market conditions. For example, a good investment for a long-term retirement plan may not be a good investment for higher education expenses. In most cases, the right investment is a balance of three things: Liquidity, Safety and Return.

Liquidity - how accessible is your money?
How easily an investment can be converted to cash, since part of your invested money must be available to cover financial emergencies.

Safety - what is the risk involved?
The biggest risk is the risk of losing the money you have invested. Another equally important risk is that your investments will not provide enough growth or income to offset the impact of inflation, which could lead to a gradual increase in the cost of living. There are additional risks as well (like decline in economic growth). But the biggest risk of all is not investing at all.

Return - what can you expect to get back on your investment?
Investments are made for the purpose of generating returns. Safe investments often promise a specific, though limited return. Those that involve more risk offer the opportunity to make - or lose - a lot of money.

To a large extent, the choice of the right investment option will also depend upon your financial goals. For example, if you want to invest for funding your vacation next year, don't choose an investment vehicle that has a three-year lock-in.

Similarly, if you want to invest for your daughter's marriage after 10 years, don't invest in 1yr bonds for the next 10 years. Instead, choose an option that matches your investment horizon.