PPF vs Mutual fund- where to invest is a common question among investors. Both have their own set of advantages, disadvantages, features, maturity period, tax benefits, and so on. Because of the popularity and significance of PPF and mutual funds, it is essential to understand the differences between the two before investing.
In this blog, we will look at the differences between PPFs and mutual funds, as well as the benefits and where to invest.
What is the difference between Mutual funds and PPF or Public Provident Fund?
PPFs and mutual funds each have their own set of advantages and disadvantages, as well as features that can provide users with multiple benefits. As a result, before selecting one at random, it is a good idea to consider the differences between them.
| Parameters | Mutual Funds | PPF |
|---|---|---|
| Investment run by | Fund houses or Asset management companies | By Government of India |
| Requirements | To meet short or long terms goals | To build a retirement corpus |
| Return on investments | The return is determined by the performance of the underlying assets. | The returns are calculated on an annual basis. |
| Tax benefits | It is determined by the type of mutual fund investment and the duration of the investment. | PPF investments are tax-free up to Rs 1.5 lakh under Section 80C of the Income Tax Act. |
| Maturity Period | No fixed tenure | 15 years, can be extended in the blocks of 5 years |
| Liquidity | A high degree of liquidity | Low degree of liquidity |
| Risk/safety | Riskier than PPFs | PPF is a risk-free investment |
| Lock-in period | No concrete lock-in period | 15 years |
| Diversification | Yes | Fixed |
| Premature withdrawal | Certain mutual funds have a lock-in period; in such cases, SIP payments can be stopped but withdrawals are not permitted before the maturity date. | Partial withdrawal is allowed only after the completion of 6 financial years |
PPF vs Mutual Funds- What to choose next?
Mutual funds vs. PPFs Both are highly debatable due to their various drawbacks, benefits, features, tax advantages, maturity periods, and so on. Before selecting one of the two, it is critical to understand what each offers the investor, as well as the time period required to keep the invested amount until maturity. Aside from that, it is critical to determine whether or not the investment scheme provides a partial withdrawal facility. Before deciding, it is important to understand your personal needs, financial goals, and other factors. Expert advice can help you make a better decision.
