Your money: Build a balanced investment portfolio


By Ritu Wadhwa

Adopting the correct investment strategy, such as buying low and selling high, is the key to accumulating wealth. Before investing any amount, it is important to know your investment objectives and the level of risk with which you are comfortable. Before choosing an investment product, understand the risk you can take for the given return, investment time horizon, and financial goals such as buying a home, education, and child marriage , retirement, etc.

Here are some product options for building a balanced portfolio and achieving higher long-term returns.

Bank term deposits: Investors who wish to take less risk and have lower expectations of return and need a secure investment product can consider bank term deposits.

PPublic Provident Fund (PPF): Those who invest in long-term and guaranteed investment products can choose this option. The current interest rate is 7.10% (tax free) and investors are eligible for tax deduction under Section 80C up to Rs 1.5 lakh.

Post Office Monthly Revenue Scheme: This scheme is very popular among retirees as it is a government backed guaranteed investment product. Interest earned is taxable.

National pension system: It is a long-term investment product. It should be chosen by people who want regular income after retirement. It is a government sponsored retirement plan. The investor gets the additional tax benefit of Rs 50,000 under Section 80 (CCD), which is in addition to the tax benefit claimed under Section 80C. It is a market-tied product and one can expect returns between 8% and 12%.

Senior Savings Plan: This plan is only available to seniors. There is no investment risk and it is a guaranteed product. The current interest rate is 7.4% and tax exemption under Section 80 C can also be claimed.

Mutual fund : In mutual funds, a large group of investors invests and this collected amount is invested in a fund by the fund manager depending on the specific objective of the investment. It deploys the collected money in the form of bonds, stocks, money market instruments and other assets. Mutual fund returns are market-linked and depend on the underlying holdings in the mutual fund plan. Investment in mutual funds should be considered for medium to long term investments.
Direct Equity: The simple meaning of equity is ownership and returns depend on the profits of the business. Direct equity can be used long term and returns are taxable.

The author is Assistant Professor, Amity Business School, Amity University

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