By Ritu Wadhwa

Adopting a correct investment strategy, say, buying low and selling high, is key to accumulation of wealth. Before investing any amount, it is important to know your investment goals and how much risk you are comfortable with. Before choosing any investment product, understand how much risk you can take for the given return, the investment time horizon and financial goals such as purchasing a house, children’s education and marriage, retirement, etc.

Here are a few product options to build a balanced portfolio and earn higher long-term returns.

Bank fixed deposits: Investors who want to take less risk and have less return expectation and need a secured investment product can plan for bank fixed deposits.

Public Provident Fund (PPF): Those investing for long term and guaranteed investment products may choose this. 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 Income Scheme: This scheme is very popular amongst retired people as it is a guaranteed investment product backed by the government. The earned interest is taxable.

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

Senior Citizen Saving Scheme: This scheme is available only for senior citizens. 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 funds: In mutual funds, a large group of investors invest and this collected amount is invested in a fund by the fund manager depending upon the specific objective of the investment. It deploys collected money in bonds, stocks, money market instruments and other assets. Returns on mutual funds are market linked and are dependent upon the underlying holding in the mutual fund’s scheme. One should consider the investment in mutual funds for medium to long term investment.
Direct equity: The simple meaning of equity is ownership and returns depend upon the earnings of the company. Direct equity can be used for the long term and the returns are taxable.

The writer is assistant professor, Amity Business School, Amity University