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      Retirement Portfolio 101 : 7 Investment Options You Must Include

      • 5 min read
      • Last Modified Date: October 6, 2023
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      Retirement Planning has undoubtedly become the need of the times. To attain financial stability after retirement, it is important to devise a portfolio of investments that can potentially appreciate and generate returns for building a sustainable corpus. Randomly choosing an investment option can reap no particular benefit. Furthermore, putting little or no thought behind choosing an investment will just rot your money. Thus, it is wise to understand each type of investment and whether it could potentially provide you with any benefit. In our earlier article on the Simplest Guide to Retirement Planning, we outlined the steps essential for building a retirement plan. In this article, we dive deeper to understand the different aspects of investments and what can form a part of your retirement portfolio!

      Top 7 Investment Options for Your Retirement Portfolio

      • National Pension System

      National Pension System is a Government launched pension scheme that allows two modes of investment; through active choice by the selection of asset classes by the investor and auto mode by investing in pre-determined asset classes. This scheme is permissible for all Government, Private and Self-employed people.

      Reasons to include in Retirement Portfolio?

      NPS can prove to be an ideal component of a retirement portfolio as it provides a complete diversification of funds to different asset classes. At the same time, for investors with little interest and expertise in managing their retirement portfolio, NPS is the best bet as the Pension Fund Manager manages your fund. Thus, it is a must-have to protect and grow your retirement portfolio.

      In NPS, the investor needs to make regular contributions to the fund and the money will be bifurcated in the chosen mix of asset classes or will be managed by the Pension Fund Manager.

      Asset Classes under NPS:

      Asset Class Risk & Return Contribution Allowed
      Equity High Risk – High Return Maximum of 50%
      Debt Fund Medium Risk – Medium Return Maximum of 100%
      Government Securities Low Risk – Low Return Maximum of 100%
      Alternative Investments Medium Risk – Medium Return Maximum of 5%

      With this diversification of asset classes, one can invest in NPS to earn a decent return and at the same time, the safety of the Investment provider prevails due to management by the Government. The liquidity of the NPS Fund is low under the Tier 1 account. However, under Tier 2 account, which attaches a Savings A/c with Tier 1 account, the fund can be withdrawn at any time. The contributions towards NPS A/c can be claimed under 80C deductions for tax savings. 

      • Public Provident Fund

      A public provident fund is a low-risk passive investment scheme with yearly contributions of a minimum of ₹500 or a maximum of ₹150000 per year. The tenure of the PPF is 15 years. The contribution towards the PPF A/c earns a fixed interest of 6 to 7 per cent per annum which is announced by the Government of India. This interest is compounding in nature and thus holds a capacity to generate a huge corpse over the tenure, thus making them a safe bet for a retirement portfolio.

      Reasons to include in Retirement Portfolio?

      PPFs are an amazing source of passive income. One can include PPFs as the safest investment in their retirement portfolio with low risk and consistent returns generated by the Nationalised Banks. They can provide a hedge against other high-risk asset classes in the portfolio.


      Lower Liquidity – A PPF has a lock-in period of 5 years and after that, only partial withdrawals are allowed. Thus, it is very illiquid in nature.

      Taxability – PPFs are a great source of investment for tax saving. The total contribution of ₹150000 per year can be claimed as deductions under 80C. Moreover, the interest and maturity fund is tax completely tax exempt.

      Loan Facility – PPF can offer a loan against your investment fund with almost no interest cost. But, the interest will not be generated against your contribution to the PPF. This facility is only available between the third to the sixth year of the PPF Tenure.

      • Real Estate Investments

      For retirement planning, real estate can provide multiple benefits. There are mainly two forms of Real Estate Investing. One is through active purchasing of a property which generates cash flows and also appreciates over time. The passive way of real estate investing can be done through REITs, investing in fractional ownership, and crowdfunding a real estate project. Let’s understand the profitability and characteristics of Real Estate Investments.

      Reasons to include in Retirement Portfolio?

      Real Estate Investments offer a two-fold benefit of passive rental income as well as capital appreciation. In addition, popular investment options like REITs, Fractional Ownership and Real Estate Crowdfunding provide passive income sources without the hassle of maintaining a real estate property. Thus, real estate investments are a must-have to build a strong retirement portfolio with passive income.


      Passive Rental Cash flows

      Real Estate Investments have the capacity of generating passive rental cash flows every month. This acts as a monthly source of income which can aid in catering to daily expenses after retirement.

      Tax Savings

      One can opt for leverage to buy a real estate property which offers ample benefits of tax savings. Firstly, 80C deduction can be availed for Principal Repayment of the loan up to 1.5 Lakhs. Moreover, the complete interest deduction can also be claimed under Sec 30b for the Let-out property.

      Hassle-Free Passive Real-estate Investments –

      By opting for passive real estate investments, one can do away with the hassles of maintaining the property during retirement. Along with that, there will be no stress of dealing with the tenants too.

      Invest Small Amounts through passive investing

      REITs, Fractional Ownership, and Real Estate Crowdfunding allow investors to invest in real estate even though small amounts. Thus, small amounts can be dedicated monthly to invest in real estate for the retirement portfolio.

      The above characteristics make real estate a must-have part of your retirement portfolio Real Estate Investments also acts as a hedge against inflation making them an ideal asset class to be included in your retirement portfolio.

      • Mutual Funds

      Mutual Funds enable investors to make a systematic investment plan or a lump sum investment plan which can be invested into an Equity Fund, Debt Fund, Money Market Fund, or a hybrid of the same. According to the goals and risk appetite of the investor, he/she can choose from the given options. It is generally advised to allocate a lower percentage of retirement contribution to Mutual Funds as they are market-linked.

      Reasons to include in Retirement Portfolio?

      Mutual Funds are a great source for long term investments. An average of 8 to 15% compounding returns is earned with a diversified mutual fund portfolio. This can prove to be ideal for a retirement portfolio as the investment horizon is longer and thus taking advantage of the power of compounding can build a huge corpus fund over the years.

      Characteristics of Mutual Fund Investment

      Return – Equity Funds possess the ability to generate maximum returns followed by Debt and Money market Funds. Generally, Mutual Funds provide an average return of 8 to 15%. However, a 20% return is also common when the markets are rallying.

      Liquidity – Mutual Funds offer complete liquidity to the investors. Except for ELSS Mutual Funds, other Mutual Funds can be freely bought or sold. They don’t have a lock-in period. Thus, making them more flexible.

      Taxability – The short-term profits on Mutual Funds are taxed under 15% Short Term Capital Gain Tax, whereas the long term profits are taxed under 20% Long Term Capital Gain Tax. Any profit arousing within less than a year is termed as short term and, for the profit arousing for more than a year is termed as long-term.

      Risk – Generally, Equity Mutual Funds are termed as high-risk investments, and Debt and Money Market Mutual Funds are termed as medium to low-risk investments. According to the risk preferences of the investor, he/she can choose the type of fund to invest in.

      • Gold ETFs

      Gold Exchange Traded Funds operate like the stock market but are traded like a commodity which is digital gold. In this, there is no transfer of physical gold. These ETFs are traded through an exchange and are freely transferable as they are linked to the prices of the London Bullion Market. Gold ETFs are considered a low-risk investment.

      Reasons to include in Retirement Portfolio?

      Gold ETFs are much safer in terms of volatility as compared to other market-linked assets. Thus, for a safer and consistent return, Gold ETFs are ideal for a retirement portfolio.

      Characteristics of Gold ETFs 

      Returns – Gold ETFs provide an average return of 8 to 10 per cent per annum. These returns are relatively less volatile than that of Stock Markets.

      Transferability – Gold ETFs are freely transferable like shares and are usually traded through an exchange.

      Liquidity – Since Gold ETFs don’t involve physical gold, they offer high liquidity to the investors.

      Risk – Gold ETFs are a low-risk investment. Thus, it can serve as a hedge against market-linked options in a retirement portfolio.

      Thus, Gold ETFs offering the above benefits can form a part of a retirement portfolio under the safer investment bracket.

      • RBI Bonds

      RBI Bonds are facilitated by nationalized and certain permitted private banks. The bonds purchased are issued at par with a face value of ₹1000. These bonds are an extremely low-risk investment and fall in the passive income category. RBI provides a decent return on the bonds and the rate of interest is revised every six months.

      Reasons to include in Retirement Portfolio?

      RBI Bonds provide a decent return of 7.15% p.a. higher than the Fixed Deposit Rates. Furthermore, since RBI issues the interest through Nationalised and Private banks, the returns are guaranteed. Thus, the bonds provide safe and consistent returns which are ideal for the safety of the retirement portfolio.

      Characteristics of RBI Bonds

      Returns – RBI is currently providing a coupon rate of 7.15%  per annum. However, this coupon rate is revised every six months.

      Taxability – The interest on bonds is taxable under Income from Other Sources and is taxed as per the slab rate of the individual

      Tenure – The tenure of the RBI Bonds is for 7 years. Premature Redemption of the bond is permissible only to specific categories of Senior Citizens.

      • Stock Market Investments

      A stock market is a direct form of investing in shares of a company through a stock exchange. They possess the ability to produce massive returns but also risk all your investments. Thus, stock market investments should be undertaken after proper financial and technical analysis of the desired company. Furthermore, one must avoid investing in penny stocks to mitigate the risk of losses.

      Reasons to include in Retirement Portfolio?

      In terms of return generating capacity, Stock Market Investments have the highest favourability. However, only a small percentage of the retirement portfolio is suitable for Stock Market Investments to protect the retirement portfolio from extreme market volatility.

      Characteristics of Stock Market Investing

      Returns – The returns in a stock market are generally dependent on the holding capacity of the investors. Long-term holding of stocks minimizes risk and provides higher returns than short-term.

      Liquidity – Shares offer full liquidity to the investors and can be sold off anytime in the market.

      Risk – Stock Market possesses the highest amount of risk among all the asset classes. Unless invested wisely, stock markets can reap huge losses. Thus, only smaller investments should be done stock market for a retirement portfolio

      Taxability – Stock Market returns are taxed under Capital Gain just like Mutual Funds.

      With a detailed analysis of the top 7 investment options, it is imperative to choose the best possible options which can fulfil the goals of building a decent corpus for retirement. The investor must carefully weigh all the options and can include asset classes based on the tenure remaining for retirement. Along with that, a proper balance of risk and safety must be maintained to create a perfectly balanced portfolio. The choice should be to maximize the overall returns of the portfolio to fulfil the best interests of the investors.

      Assetmonk provides smart real estate investment options that can optimize your retirement portfolio through carefully curated investments in Growth, Growth Plus, and Yield Models which are aimed at providing a maximum return of IRR 21%.

      Retirement Portfolio FAQ’s:

      What is the best option for retirement planning?

      From the above-listed investment options, the National Pension System includes a mix of major investment avenues. However, along with that, combining NPS with other 3 to 4 options can prove to build a robust fund for retirement.

      What is the best investment for retirement income?

      From the above-listed investment options, the National Pension System includes a mix of major investment avenues. However, along with that, combining NPS with other 3 to 4 options can prove to build a robust fund for retirement.

      Where should I invest my retirement money in India?

      For higher returns, investment in Mutual Funds, Stock Markets, and Real Estate will be optimal. Whereas on the lower risk side, an investment in PPF, Gold ETFs, and RBI Bonds will be optimal.

      Which is the safest investment with the highest return?

      PPFs are the safest investment and also provide higher returns than a Fixed Deposit. However, for other high-earning investments, a portion of the risk is applied.

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