People have a lot of confusion as to which is better Mutual funds or PPF. Both of them are the most popular savings instruments with good returns. But as an investor, it is important to compare and know the various investment options available in the market and invest accordingly. Investment should not be based on the returns or tax exemptions. One should have an overall knowledge of the investments. Before starting with the comparison between the two it is important to know them.
Public Provident Fund (PPF) is a long-term savings investment options established by the Govt. of India in 1968. It offers tax benefits on withdrawal as well as on contributions. It inculcates the habit of savings amongst Indian citizens for their life after retirement. PPF is backed by the Indian government and offers guaranteed, risk-free returns as well as complete capital protection.
A mutual fund is an investment vehicle that pools the money of a large group of investors and invests this in stocks, bonds, money market instruments and other types of securities. There are three broad categories of Mutual Funds.
So now after studying mutual funds and PPF, we can make a comparison between the two on the following grounds:
Debt-oriented mutual funds invest in Govt. Securities (G-Sec), corporate bonds, PSU Bonds and other Debt Securities which help in generating secured returns.
ELSS are tax saving mutual funds that you can use to save income tax of up to Rs 1.5 lakh under Section 80C. ELSS funds have a lock in period of 3 years and invest a majority of their portfolio in the stock market.
Your investment choice should be guided by your investment objectives and your risk tolerance level and liquidity requirements. Investors with high-risk tolerance should invest in ELSS, while investors with low-risk tolerance should invest in PPF.
Equity Oriented Mutual Funds are those in which more than 65% of the funds are invested in equities. The risk in these funds is higher than that of the debt oriented mutual fund schemes.
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