Public Provident Fund or Mutual Funds?

Business & Finance

Public Provident Fund or Mutual Funds: Which Is A Better Investment?

Investors use both PPF and Mutual Funds to attain their long-term financial goals. PPF and Mutual Funds are both long term investment instruments. Apart from this fundamental similarity, they are different in several other facets and serve the investors with diverse goals.

Public Provident Fund or PPF

PPF stands for Public Provident Fund. It is a tax exempted savings instrument that lets people save a portion of their annual income for the future. Investors who have invested in PPF can earn interest income on their principal, which is not taxable. PPF is a saving instrument for risk opposed people as the central government is responsible for it; hence it is safe.

Some benefits of the PPF scheme are:

The government secures it.
Tax benefits come under section 80C.
Deposits can start from a minimum amount of Rs 500.
The interest income is fixed.

Mutual Funds

Mutual Funds are financial instruments in which investors invest their own money in the stock market through a professional who manages the profit and loss scale. The funds collected from all the investors are invested collectively. This makes it a little risky.

Some benefits of Mutual Funds are:

The returns can be higher.
Professionals manage it.
It provides the option of both Lump-sum and SIPs.
Investors can start from significantly fewer amounts as well.

PPF vs Mutual Funds

When making investment decisions, the investors' risk appetite and financial goals should be kept in mind. “Investing decisions should be based on an individual's risk profile, goals, and time horizon of the investment.” Said Dilshad Billimoria, Board Member of the Association of Registered Investment Advisors. She further explained that Both PPF and Mutual funds are a great option from the asset provision point of view because PPF caters to Fixed Income and Mutual funds have equity debt, gold, and multi-asset options. She added: “The decision to invest in a particular asset class should be after considering the above parameters,” When investing in any of them, compare both in respect to the amount being invested and the tenure. PPF vs Mutual Fund Calculator can compare on who can give you better returns as per your investment plan.

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