Public Provident Fund (PPF) vs Mutual Funds (MFs): Check 6 step guide to big gains

Mar 06, 2018, 05:26 PM IST

Public Provident Fund (PPF) vs Mutual Funds (MFs): PPF has been preferred investment option, due to tax efficiency, guaranteed returns. Mutual funds gained popularity over the last few years. To pick best investment option, we tell you what you must do. Investor must look at many factors other than returns and tax efficiency. 6 steps to big gains here: 



LIQUIDITY: PPF is a long-term, government-backed savings scheme to create a retirement corpus. PPF is a popular investment option as it offers guaranteed returns and tax benefits. MFs pool and invest savings of many investors in diversified instruments. PPF investments have lock in period of 15 years; MFs can be partially withdrawn from year 7


TIME HORIZON: If your investment time horizon is long-term, invest in equity-oriented MFs to get higher returns than PPF


DIVERSIFICATION: PPF gives exposure to only debt instruments; MFs invest across asset classes


TAX SAVING: PPF is preferred because of its eligibility for tax deduction under section 80C. However, same tax deduction of Rs 1.50 Lakh is available with higher returns via ELSS MFs


POST TAX RETURNS: Debt MFs better, as they offer similar returns with more liquidity


ELIGIBILITY: Only Indian Residents can open PPF account. MFs accept investments from NRI investors too. Also, there is no limit on investment amount or number of accounts in MFs


VERDICT: MFs have a clear advantage over PPF