I use kaspersky internet security, previously i was using avg free antivirus backed up with malwarebytes antimalware which provided decent protection, if avg missed something, malwarebytes caught it quickly. The peculiar incidents that occurred was that while running a scan with malwarebytes, avg would suddenly detect a infection although i had run a scan with avg first and it did not find anything.. So it appears something withing malwarebytes programming that flushes infections to surface better than avg. However while using kaspersky internet security now every malwarebytes scan comes up with no infections so that proves kaspersky does an excellent job and possibly no need for malwarebytes.
If you want to go the free route, comodo free firewall is good for a free firewall, i think it works well with avast. Also spywareterminator does provide online protection on their free version. I have never test comodo firewall though, although some moderators here swear by it. If i was going the free route i would try and combine these if they are compatible. As for encrypting files, i do not have any information there.