6 Replies to “considering the current economy, Is it good to invest in mutual fund or PPF account ?”

  1. Public Provident Fund

    PPF is similar to PF with the only difference being, anyone can open a PPF account by visiting the nearest State Bank of India branch. PPF is also managed by the government of India. Once we open a PPF account we can deposit cash in our PPF account anytime. There is one restriction here. We must deposit at least Rs. 500/- every year to keep our PPF account active. The maximum amount we can remit in our PPF account every year is Rs. 70,000/- Our PPF account remains active for 15 years and if we want we can extend it by a further 5 years. We cannot encash the entire amount in our account before the tenure of 15 years. Of course we can do partial withdrawals from our account but we cannot take out the entire corpus.

    Safety = Very high because backed by the government
    Returns on Investment = Average – Our Inflation is 11% and the returns on PPF is only 8%

    Investment Strong points:
    a. Extremely Safe
    b. A decent amount deposited every year can help us make up a good corpus over the long run.

    Downside:
    a. Only average returns.
    b. Very long lock in period. We cannot take out our cash before 15 years
    c. We need to deposit at least Rs. 500/- every year to keep the account active.

    Mutual Funds:
    mutual funds invest predominantly in Large cap stocks (Companies that are very large with exceedingly high capability of profit making, that have been successful for a number of years) Since the money we invest is invested in the Share market, the returns are not constant. In years in which our market performs well we can expect exceptional returns but at the same time it carries a risk. If our markets perform poorly we may incur losses. But over the years, the Indian share market has been able to give a returns of at least 15-20% year on year.

    Safety = Low, because the money is linked to the share market.
    Returns on Investment = Very high – If the share market goes up, our returns may exceed 20%. In the past 2 years until Jan 2008, our markets have dished out returns as high as 50%

    Invest Strong Points:
    a. High returns
    b. A small amount investment every month can help us accumulate wealth over the years.
    c. Returns on Mutual funds are tax free. Both Dividends and the maturity amount.

    Downside:
    a. High risk because it is linked to the stock market


  2. I think it would greatly be contingent on how soon you need the money and what you are investing for. Not much of an answer, but thats the key. Is it money you’re going to need within the next 2-3 years…or money for retirement.


  3. It’s good time to invest in Mutual funds. but choose one with good AUM ie amount under management. recently news were there that prudential mf is for sale.
    however don’t put too much money in one mf and diversify in various companies. don’t invest more than 1 lakh in one. also SIP is the best option as even if markets go further down you will get average price across investing time


  4. PPF a/c is mainly for claiming income tax benefit.
    Normally the amount invested in PPF is available to the a/c holder after maturity i.e. after 15 years from the date of opening the a/c. At present rate of int. in PPF a/c is less than 9%p.a.
    Investment in some mutual funds is also exempted for income tax. The current economy offering us Mutual fund investment at a lower rate. This investment can be available 3 years after investment date. Market down trend and up trend are always followed one after the other.
    Considering all these I think it is beneficial to invest in mutual funds.



  5. It would be better to go for a mutual funds since the stock market is running low these days, and is bound to rise eventually. Also, the minimum period of investment for many leading banks has been reduced from 3 years to 2 years in case of tax saving mutual funds, like SBI and ICICI





Leave a Reply

Your email address will not be published. Required fields are marked *