look news india
New Delhi/Business Desk: There was a time when whenever there was mention of safe investment and tax saving in India, the first name that came up was Public Provident Fund (PPF). This used to be the first choice of every working person and middle class family. However, after the changing economic scenario, the boom in the stock market and the advent of new age investment options, there has been a slight decline in its attractiveness, but its real importance has not diminished even today. Financial experts believe that PPF is still a very reliable and sure shot weapon for those investors who want to create a big fund for a long time without any risk.
Why did the PPF equation change? Understand the new mood of the market
In the last few years, due to fluctuations in interest rates at global and domestic level, the interest received on PPF has declined compared to earlier. Along with this, the number of taxpayers adopting the ‘New Tax Regime’ in the country has increased rapidly, due to which the attractiveness of the traditional tax exemption (Section 80C) available in PPF has reduced slightly for them. On the other hand, mutual funds (SIP) and equity markets have given bumper returns to investors in the last few years. This is the reason why today’s young generation is moving towards aggressive options instead of relying only on traditional schemes for investment.
Why is PPF still ‘king’? Know its 3 biggest features
Despite there being hundreds of asset classes (types of investment) in the market, PPF still stands apart and strong because of some of its features:
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100% government guarantee: Your money deposited in this scheme and the interest received on it has a Sovereign Guarantee directly from the Government of India. This means that no matter how much the market falls or sinks, your money remains completely safe.
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Benefits of strong EEE status: PPF even today has the status of ‘Exempt-Exempt-Exempt’ (EEE). This means that under the old tax system, the amount invested, the annual interest received on it and the entire amount received at the time of maturity (on completion of 15 years) is completely tax-free.
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Power of Compounding: Being a long term plan (15 years), it has the benefit of compounding, which gradually turns your small savings into a huge corpus (fund).
Asset Allocation Strategy: Build the Foundation of a Balanced Portfolio
Personal finance experts say that in today’s times, it is wise that instead of making PPF your sole source of investment, you should use it as a ‘safe investment portion’ of your portfolio. An ideal strategy could be to invest in mutual funds and equities for better inflation-beating returns in the long term, and put money in PPF to balance the market risk. When there is a huge fall or fluctuation in the stock market, the safe and stable returns from PPF strengthen your portfolio and give you peace of mind.
Before investing in PPF, definitely ask yourself these important questions
In today’s time, it is important for every investor to know what their financial goals are. Before investing, assess your income, age and risk profile (risk appetite). If your main objective is children’s higher education, marriage or to create a secure retirement fund for yourself where security is the first priority, then PPF is still the best and essential option for you. At the same time, if you want to grow your wealth faster, it would be wise to adopt a balanced approach by combining equity-based investments with the safe haven of PPF.