{"id":3752,"date":"2021-08-05T18:49:09","date_gmt":"2021-08-05T13:19:09","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=3752"},"modified":"2022-05-25T18:41:54","modified_gmt":"2022-05-25T13:11:54","slug":"ppf-vs-mutual-fund","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/ppf-vs-mutual-fund\/","title":{"rendered":"PPF vs Mutual Funds 2022: Which Is a Better Investment Option"},"content":{"rendered":"\n<p>There are a plethora of <a href=\"https:\/\/www.tickertape.in\/blog\/best-investment-plans-for-3-years-with-high-returns-in-2021\/\">investment options<\/a> to suit any kind of risk profile that an investor may have. While the focus of investors has traditionally been to earn maximum returns, the right approach as professed by industry stalwarts is that the returns you earn from investments must compare with the kind of risk you are willing to take.<\/p>\n\n\n\n<p>Two very popular long-term investments in India are Public Provident Fund (PPF) and <a href=\"https:\/\/www.tickertape.in\/blog\/mutual-funds\/\">mutual funds<\/a>. While PPF offers a lower and fixed rate of income for the duration of investment, mutual funds offer market-linked returns. Let\u2019s deep-dive into each and assess PPF vs mutual funds in detail.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/ppf-vs-mutual-fund\/#What-is-PPF\" title=\"What is PPF?\">What is PPF?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/ppf-vs-mutual-fund\/#Features-of-PPF\" title=\"Features of PPF\">Features of PPF<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/ppf-vs-mutual-fund\/#What-is-a-mutual-fund\" title=\"What is a mutual fund?\">What is a mutual fund?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/ppf-vs-mutual-fund\/#Features-of-mutual-funds\" title=\"Features of mutual funds\">Features of mutual funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/ppf-vs-mutual-fund\/#PPF-vs-mutual-fund-%E2%80%93-the-difference\" title=\"PPF vs mutual fund &#8211; the difference\">PPF vs mutual fund &#8211; the difference<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/ppf-vs-mutual-fund\/#PPF-vs-mutual-fund-%E2%80%93-which-one-should-you-choose\" title=\"PPF vs mutual fund &#8211; which one should you choose?\">PPF vs mutual fund &#8211; which one should you choose?<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"what\"><span class=\"ez-toc-section\" id=\"What-is-PPF\"><\/span><strong>What is PPF?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Public Provident Fund, or PPF as it is popularly known, is a fixed interest-earning, long-term <a href=\"https:\/\/www.tickertape.in\/blog\/age-wise-retirement-planning\/\">investment<\/a> that is offered by the Government of India. This means that you can open a PPF account with a bank or a post office, but the amount is ultimately deposited with the government. The minimum deposit is Rs 500 and the maximum is limited to Rs 1.5 lakh in a financial year. Once you open the account, you have to make at least one contribution in a financial year to keep the account active. You can deposit once or up to 12 times in one financial year. PPF has a maturity period of 15 yrs.&nbsp;<\/p>\n\n\n\n<p>The <a href=\"https:\/\/www.tickertape.in\/blog\/flat-interest-rate-vs-reducing-balance-interest-rate\/\">interest rate<\/a> on PPF deposits is determined by the government. It is also reviewed every quarter. The current interest rate (for the quarter starting from 1 Jul 2021) is 7.1% per annum which is compounded annually.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"features\"><span class=\"ez-toc-section\" id=\"Features-of-PPF\"><\/span><strong>Features of PPF<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Here are some of the salient features of the PPF scheme:<\/p>\n\n\n\n<ul><li>Only resident Indian investors can open PPF accounts. Moreover, you can have only one PPF account in your name.<\/li><li>You can extend the investment tenure in blocks of 5 yrs after the minimum tenure of 15 yrs is over.<\/li><li>The loan against the PPF account balance is available between the 3rd and the 5th yr of investment. Partial withdrawals, on the other hand, are allowed after 6 completed years, once a year.&nbsp;<\/li><li>PPF investment is an EEE instrument from a tax perspective. This means investment into the scheme is tax-free under Section 80C of the <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-income-tax\/\">Income Tax<\/a> Act, 1961. The interest earned, partial withdrawals and the amount received on maturity are also completely tax-free.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"what2\"><span class=\"ez-toc-section\" id=\"What-is-a-mutual-fund\"><\/span><strong>What is a mutual fund?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A mutual fund is a market-linked investment avenue that pools the investment of different investors and then invests this pooled corpus in different market-linked securities. The investment is done as per the investment objective of the mutual fund scheme and the portfolio is <a href=\"https:\/\/www.tickertape.in\/blog\/is-mutual-fund-a-safe-investment-risks-in-mutual-fund-investment\/\">professionally managed by experienced fund managers<\/a> of private organizations, mostly Asset Management Companies (AMCs).  If the value of the underlying securities increases, you earn returns, and if the value reduces, you suffer losses.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"features2\"><span class=\"ez-toc-section\" id=\"Features-of-mutual-funds\"><\/span><strong>Features of mutual funds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Here are some of the salient features of mutual fund investments:<\/p>\n\n\n\n<ul><li>Mutual funds come in different types. There are <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-equity\/\">equity<\/a> funds, <a href=\"https:\/\/www.tickertape.in\/blog\/what-are-debt-funds\/\">debt funds<\/a>, balanced funds, and others to choose from as per your risk appetite.<\/li><li>The minimum investment into the schemes usually starts from Rs 500. You can <a href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/\">invest<\/a> a lump sum or in instalments through SIPs. There is, however, no limit to the amount that you can invest.<\/li><li>Mutual funds are very liquid. Except for ELSS schemes which have a lock-in period of 3 yrs, you can withdraw from your investment whenever you want from most schemes.&nbsp;<\/li><li>Returns depend on market movements and the type of fund that you have invested in. Equity funds are high-risk high-return schemes while debt funds have a low-risk low-return profile. <a href=\"https:\/\/www.tickertape.in\/blog\/top-hybrid-funds\/\">Hybrid funds<\/a>, on the other hand, mix both equity and debt and have a moderate risk-return profile.<\/li><li>Investment into <a href=\"https:\/\/www.tickertape.in\/blog\/information-on-tax-saving-mutual-funds\/\">ELSS schemes earns a tax deduction<\/a> under Section 80C. Other schemes do not provide this tax benefit. Returns earned are called capital gains and they are taxed depending on the tenure to which the fund is owned.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"difference1\"><span class=\"ez-toc-section\" id=\"PPF-vs-mutual-fund-%E2%80%93-the-difference\"><\/span><strong>PPF vs mutual fund<\/strong><strong> &#8211; the difference<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As is evident from the definition and features of each, PPF and mutual funds have certain differences.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Differences&nbsp;<\/strong><\/td><td><strong>PPF<\/strong><\/td><td><strong>Mutual fund<\/strong><\/td><\/tr><tr><td>Type of scheme<\/td><td>Fixed-income investment<\/td><td>Market-linked investment<\/td><\/tr><tr><td>Market risks<\/td><td>Nil<\/td><td>Exposed to market risks<\/td><\/tr><tr><td>Minimum and maximum investment&nbsp;<\/td><td>Minimum &#8211; Rs 500Maximum &#8211; Rs 1,50,000<\/td><td>Minimum &#8211; Rs 100Maximum &#8211; no limit<\/td><\/tr><tr><td>Return<\/td><td>7.1% compounded annually<\/td><td>Depends on the type of scheme and market performance&nbsp;<\/td><\/tr><tr><td>Tenure&nbsp;<\/td><td>15 yrs extendable by 5 yrs thereafter<\/td><td>No fixed tenure. You can invest for as long as you want<\/td><\/tr><tr><td>Loans and partial withdrawals<\/td><td>Available&nbsp;<\/td><td>Not available. Any withdrawal from the scheme is considered as redemption<\/td><\/tr><tr><td>Liquidity&nbsp;<\/td><td>Not very liquid<\/td><td>Highly liquid. However, ELSS schemes have a lock-in period of 3 yrs<\/td><\/tr><tr><td>Tax benefit on investment<\/td><td>Tax-free under Section 80C<\/td><td>Only ELSS investments are tax-free under Section 80C<\/td><\/tr><tr><td>Tax benefit on returns<\/td><td>Returns are completely tax-free<\/td><td>Returns are taxed depending on the type of scheme and the tenure after which you redeem your investment<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"difference2\"><span class=\"ez-toc-section\" id=\"PPF-vs-mutual-fund-%E2%80%93-which-one-should-you-choose\"><\/span><strong>PPF vs mutual fund <\/strong><strong>&#8211; which one should you choose?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Both the investment avenues have their respective pros and cons. Choosing between either depends on your investment needs and risk profile. You can choose PPF if:<\/p>\n\n\n\n<ul><li>You are risk-averse<\/li><li>You want guaranteed returns<\/li><li>You have a long-term investment horizon<\/li><li>You want to save the maximum amount of tax<\/li><\/ul>\n\n\n\n<p>On the other hand, <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-invest-in-mutual-funds-beginners-guide-to-mutual-fund-investment\/\">mutual funds<\/a> are suitable for you if:<\/p>\n\n\n\n<ul><li>You want exposure to the <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-invest-in-shares\/\">stock market<\/a> but are not confident of making stock investments independently<\/li><li>You have the appetite and tolerance for the associated risks&nbsp;<\/li><li>You want liquidity<\/li><li>You want inflation-adjusted and market-linked returns on your investments<\/li><\/ul>\n\n\n\n<p>Alternatively, you can choose to invest in both PPF and mutual funds to diversify your portfolio. While PPF investments would give you guaranteed returns, mutual fund investments would help in wealth creation with the potential of attractive returns.&nbsp;<\/p>\n\n\n\n<p>It is important to understand how PPF and mutual funds work.  You can choose to include both mutual funds as well as PPF in your portfolio.<\/p>\n\n\n<span class='bctt-click-to-tweet'><span class='bctt-ctt-text'><a href='https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2Fppf-vs-mutual-fund%2F&#038;text=An%20investor%20needs%20to%20align%20their%20choice%20of%20investment%20avenues%20to%20their%20risk%20appetite%2C%20financial%20goals%2C%20investment%20horizon%2C%20and%20return%20expectation.&#038;via=TickertapeIN&#038;related=TickertapeIN' target='_blank'rel=\"noopener noreferrer\">An investor needs to align their choice of investment avenues to their risk appetite, financial goals, investment horizon, and return expectation. <\/a><\/span><a href='https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2Fppf-vs-mutual-fund%2F&#038;text=An%20investor%20needs%20to%20align%20their%20choice%20of%20investment%20avenues%20to%20their%20risk%20appetite%2C%20financial%20goals%2C%20investment%20horizon%2C%20and%20return%20expectation.&#038;via=TickertapeIN&#038;related=TickertapeIN' target='_blank' class='bctt-ctt-btn'rel=\"noopener noreferrer\">Click To Tweet<\/a><\/span>\n\n\n<p> This will offer not only <a href=\"https:\/\/www.tickertape.in\/blog\/mitigating-portfolio-risk-through-diversification\/\">diversification<\/a> but also lend stability to your portfolio. Kindly conduct proper research before making decisions on portfolio investments.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Wondering which among PPF &#038; mutual funds is a better investment option? Click here to read about PPF &#038; mutual funds, their features, how they work &#038; differences between the two.<\/p>\n","protected":false},"author":27,"featured_media":3631,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[8],"tags":[78,198],"acf":[],"modified_by":"Neera Bhardwaj","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/06\/MF-2-3.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3752"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/27"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=3752"}],"version-history":[{"count":14,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3752\/revisions"}],"predecessor-version":[{"id":8851,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3752\/revisions\/8851"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/3631"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=3752"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=3752"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=3752"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}