There was a time when Public Provident Fund (PPF) was the first choice of almost every investor. From tax savings to safe returns, this scheme has been a strong investment option for a long time. Although its role has certainly changed after the changing economic environment and the advent of new investment options, its importance has not diminished even today. Experts believe that PPF is still a reliable option for those investors who want to keep their money safe for a long time without risk.
Interest rates have declined in the last few years. For this reason, the interest received on PPF has also reduced as compared to before. Apart from this, the tax benefits of PPF for investors adopting the new tax regime are also not as attractive as before. On the other hand, equity based investment options like mutual funds and stock market have become increasingly popular. Now these investments are considered to be strong options giving better returns in the long term. This is the reason why PPF is no longer the only investment option.
Despite the changing times, many features of PPF still make it special. In this scheme, there is a government guarantee on investment, hence there is no risk of capital loss. Also, PPF gets EEE (Exempt-Exempt-Exempt) tax status. That is, the benefit of tax exemption is available on all three – investment, interest and maturity amount, provided the investor is taking advantage of the old tax system. This is why PPF is still considered a good option for those whose priority is capital security and stable returns.
Financial experts say that in today's time, it is a better strategy to make PPF a part of a balanced portfolio instead of making it the basis of the entire investment. While equity and mutual funds work to provide better returns in the long run, PPF provides stability and security to the portfolio. PPF gives mental peace to investors even during market fluctuations because returns are guaranteed in it.
Today the biggest question before investors is not whether they should invest in PPF or not. The real question is how much one should invest in PPF as per their income, financial goals and risk appetite. If your goal is to create safe savings, tax savings and long-term risk-free funds, then PPF is still a strong option. At the same time, if you want higher returns, then it would be wise to include equity based investments in your portfolio along with PPF. In this way a balance can be struck between security and better returns.
