Public Provident Fund (PPF) and mutual fund investments are long-term investment tools. However, PPF is completely a debt-instrument and risk-free investment while mutual funds are market-linked and hence ‘mutual fund investments are subject to market risk.’
According to experts, ‘mutual fund sahi hai’ holds well for those investors who have a high risk appetite while PPF is a suitable investment tool for an investor who has low risk appetite.
Speaking on PPF vs Mutual Funds; Kartik Jhaveri, Director – Wealth Management at Transcend Consultants said, “Both PPF and Mutual Funds are two different sets of investment tools but one should have a diversified portfolio where one must have a PPF account too.
“How much a person should invest in PPF and mutual funds depends upon the risk appetite of the investor. If the investor has a higher risk appetite, then mutual funds are a better money making tool for such investors. But, even when the risk appetite of the investor is high, investment in PPF is a must for getting assured returns.”
SEBI registered tax and investment expert, Jitendra Solanki said, “For long-term investment mutual funds are better than PPF as in the long-term mutual fund investments would yield at least 12 per cent return on one’s investment while the PPF interest rate is decided quarterly by the center.” Currently, PPF interest rate is 7.1 per cent.
However, Kartik Jhaveri said that PPF is income tax exempted while mutual funds incur long term capital gains tax. He said that PPF investment falls under EEE category, and hence one’s investment up to Rs 1.5 lakh in a particular financial year is income tax exempted and the interest as well as maturity amount are also tax exempted. So, if the market behaves topsy-turvy in the last few years of the mutual fund investment, in that case PPF investment would be a healer for investors as it’s free from market risk.
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