WHICH OPTION IS BETTER MUTUAL FUND OR PPF?


BETTER MUTUAL FUND or PPF
Public Provident Fund 



When it comes to investing money, we are drenched in a pool of options. Many of these are successful in ticking off almost all the conditions such as high returns, low risk, feasibility in the liquidity of portfolio, and tax saving. A mutual fund is said to be the ideal investment option in the current scenario.

To make the picture more transparent, we at Savepro are going to compare mutual fund investment with other investment avenue– PPF.



BETTER MUTUAL FUND or PPF
Mutual Fund 




I.MUTUAL FUNDS VS. PUBLIC PROVIDENT FUND (PPF)

PPF is a savings scheme which accumulates savings and provides a reasonable interest rate along with tax benefits. Mutual funds, on the contrary, are offered by asset management companies and designed to cater to the needs of the investor based upon his risk taking capacity. They try to invest the corpus of the fund in stocks, bonds, government securities, and money market instruments to accomplish investor’s financial goals. Their sole aim is to earn higher returns with moderate risk. While the mutual fund is based on risk-return principle, PPF is run by the central government to make citizens of India go for long-term savings in government-operated projects.

Returns

PPF is an instrument that provides a fixed rate of stable return. Return on investment in PPF is around 8% annually and keeps changing as per government policies. Mutual funds can fetch returns up to 12% or more in large-cap funds and up to 20% or more in small-cap funds.

Investment Objectives

The main objective of PPF is creating a retirement corpus. On the other hand, the investment objective of a mutual fund can vary depending upon the needs of the investor such as fulfilling a short-term goal of buying a car, a medium-term objective of college education for kids, or a long-term objective such as creating a retirement corpus or purchasing a house.

Tax Benefits

PPF avails the benefit of tax-free investment up to Rs. 1,50,000 every year and all returns are tax exempted under section 80C. Mutual fund is taxable depending upon the scheme. Under non-tax exempt fund, Long-Term Capital Gain (LTCG) over Rs. 1 Lakh is taxable while Equity Linked Savings Schemes (ELSS) is tax-free up to Rs. 1.5 lakh under section 80C.

Tenure

PPF is a locked-up investment for 15 years only to be renewed in sets of 5 years after maturity. Mutual fund, on the contrary, can opt out any time between 6 months or till he/she wants to continue investing.

Liquidity

PPF being a long-term investment, is not liquid. However, arrangements such as withdrawal of 25% of the balance in the form of a loan, to be availed 7th year onwards is available. Mutual fund investments are fluid and can be withdrawn within 1 to 2 days.


This comparative study has led us to the conclusion that mutual fund investment, with its growth potential under the vigilance of expert investment professionals, stands out. You need to do a thorough research of the schemes and then take action according to what you require.

Also Read : How to avoid too much debts?

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