Investment can be optimized, if we understand how to plan it. Usually, investors look for plans where returns are high and quick while the risk of loss is low. In reality, such a product is hard to come by. Risk is directly related to returns.

While planning an investment portfolio, you should ask yourself some questions regarding investment goals, the kind of risk you are willing to take, and the principal amount that you are planning to invest on a monthly or yearly basis.

There are two categories of investment; financial and non-financial assets.

Financial assets - Investments in stocks and mutual funds fall under such assets. They are dependent on market fluctuations and their returns may vary.

Non-financial assets - Are fixed income products like PPF, bank FDs. These products have a pre-assigned interest rate and will yield the promised amount at the time of maturity.

A good idea is to distribute your investment and take a slice of both financial and non-financial assets. Now, the kind of risk you are willing to take will decide which slice will be bigger in size.

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Let’s take a look at top options from both the assets:

Debt Mutual Funds
- If you are looking for regular income, you can look at debt mutual funds. Debt Mutual Funds or Fixed Income Funds, invest in fixed instruments, such as government bonds, corporate bonds, money market instruments, etc.

Some of the few advantages of Debt Funds are relatively stable returns, safety, low cost, and relatively high liquidity. Even though they promote high stability, you should study before investing.

Equity Mutual Funds - Also known as Growth Funds invest their money in company stocks and shares. Yes, they offer higher returns over the years. But finding the right stocks is tricky. Also, timing your entry and exit points is not that easy.

Equity Funds can be active or passive. In active, a fund manager scans the company’s stocks and performance and then decides to invest. While in the case of passive; the fund manager will create a portfolio as per a popular market index.

To diversify the risk of loss, you should diversify your investments as per market capitalization, such as large-cap, mid-cap, and small or micro-cap.

National Pension Scheme - Is a retirement investment plan defined to deliver a steady return post retirement through systematic savings during your working life.

NPS is flexible and gives you the option to choose from a range of Pension Funds to plan your growth. The scheme is divided into two tiers.

Tier I - is a non-withdrawable account, where systematic and regular contributions are made. Credits are made as per the portfolio the fund manager has chosen for the subscriber.

Tier II – is a withdrawable account, and withdrawals are allowed when there is an active Tier I account in the name of the subscriber. You can withdraw funds when required.

Public Provident Fund (PPF) - Is a tax saving investment option introduced by the government of India. PPF helps to build a retirement corpus and saves annual tax. PPF investments are safe as they are backed by sovereign guarantee. The minimum investment amount in PPF is Rs.5000 and the maximum you can go up to Rs.1.5 lakh per annum. The interest rate is 7.1 per annum and the tenure is for 15 years.

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Fixed Deposit - FD is an instrument that can be availed through any bank. Fixed Deposit allows you to save a specific corpus for a fixed tenure; the interest is payable quarterly from the date of deposit or when your FD matures. The interest for a Fixed Deposit account is higher as compared to a savings account.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.