PPF vs Mutual Fund

PPF vs mutual fund. Which is better?

Investing is no longer associated with wealth. To protect one’s future it has become essential. In this blog, let’s compare Public Provident Funds (PPF) and mutual funds to see which is a better option for you.

What are public provident funds(PPF)?

The Public Provident Fund, popularly abbreviated as PPF is used as a tax-free savings vehicle to save aside a portion of one’s annual income for the future.

PPF investors may get tax-free interest income on their capital if the amount was received on maturity. PPF is a risk-averse person’s saving tool that is supported by the government.

PPF vs Mutual Fund. Which is better

What are Mutual funds?

Mutual funds, a popular method of investing, pool client money to purchase a range of securities, such as stocks, bonds, and money market instruments. 

Mutual funds are governed by the Securities Exchange and Board of India (SEBI). Through mutual funds, investors have access to professional fund management.

The fund management staff carefully considers the fund’s objective before making any investing decisions. Assets like bank savings accounts and fixed deposits perform better than more traditional ones, thanks to skillful management.

Equity and debt mutual funds are the two main types of mutual funds. Equity mutual funds’ primary investments are equity and equity-related goods.

The many forms of equity funds include large-cap, mid-cap, small-cap, multi-cap, sectoral or thematic, tax-saving, etc. 

Conversely, debt mutual funds make investments in corporate bonds, government securities, and other financial goods. There are many different types of debt mutual funds, including liquid funds, dynamic bond funds, and short- and ultra-short-term funds, among others.

Less is more

Mutual Funds Vs PPF (Public Provident Funds).

PPFs and mutual funds, each have their own set of perks and drawbacks. Therefore, it is a good idea to take into account their distinctions before choosing one at random.

ParametersMutual FundsPublic Provident Funds (PPF)
Investment run byFunding institutions or asset management firmsBy The Government of India
RequirementsTo achieve short- or long-term objectivesTo amass a retirement fund
Return on investmentsThe performance of the underlying assets affects the returnsAnnual returns calculations are made
Tax benefitsThe sort of mutual fund investment and the length of the investment are what define itUp to INR 1.5 lakh of PPF investments are tax-free under Section 80C of the Income Tax Act
Maturity PeriodNo fixed tenure15 years, which may be extended in 5-year chunks.
LiquidityA high degree of liquidityLow degree of liquidity
Risk/safetyRiskier than PPFsPPF is a risk-free investment
Lock-in periodNo concrete lock-in period15 years
DiversificationYesFixed
Premature withdrawalThere are certain mutual funds that have a lock-in period; in these instances, SIP payments can be stopped, but withdrawals are not allowed prior to the maturity date.Only after the end of six fiscal years is a partial withdrawal permitted.

PPF vs Mutual fund – Which is better for you?

The decision between a PPF and a mutual fund relies on the objectives or aims of the investor. The latter operates more like a savings plan whereas, the first is a market-linked program. 

While PPF delivers predictable returns and is most suitable for investors who are risk-averse. Conversely, mutual fund companies invest in a variety of securities, including government bonds, debt, and shares.

As a result, it offers the potential for bigger profits, but because it is market-linked, the risk is also higher.

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FAQs

Is PPF still a wise choice for investments?

One of the most popular long-term and tax-saving programs for depositors is the PPF program since it offers a variety of benefits.

If a person can make consistent investments for 15 to 25 years, compound interest might help them amass a sizeable wealth of about Rs 1 crore. The PPF interest rate is modified every three months.

Which is preferable, PPF or SIP?

SIP and PPF are both long-term investing strategies. They vary, nevertheless, in terms of maturity and lock-in time.

A PPF has a tenor of 15 years and a 7-year lock-in period, whereas SIPs can be stopped and redeemed at any time. You can then take out a portion of the money after that.

Which investment is good for a child’s future?

It is a great idea to start investing in equity mutual funds when your child is still young and you have at least 15 to 20 years before retirement. This makes it possible for you to resist shocks like volatility and stock market crashes.

When developing investment plans, each person has their own way of thinking and attitude. While some people want larger profits, others want financial security.

It’s critical to assess your financial status before making any form of investment, including those in mutual funds or Public Provident Funds (PPF).

Consult an expert advisor to get the right plan

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