PPF Account: How to make the most of this tax-free Investment Option?

Looking for a guaranteed investment option? Know more about the wonders of having a PPF account.

A PPF account, also known as a Public Provident Fund account is an excellent option for making retirement investment. Not only does it offer tax-free benefits, but also provides good interest as well. Under a Public Provident Fund account, you can deposit Rs. 1.5 lakhs per year for a lock-in period of 15 years and earn an interest rate of 8% at present. The rate of interest is compounded annually. Also, this scheme enjoys ‘EEE’ rating which means that the principal amount invested is entitled to tax deduction as per Section 80C of the Income Tax Act, 1961. The interest earned as well as the maturity amount is tax-free.

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Can you lose your money in a mutual fund?

A mutual fund is still a financial product that is not considered safe as per many Indian investors. The delayed returns and fear of losing money makes mutual funds a scary mode of investment for some people. However, the truth is far from reality. While it is a fact that mutual funds are not completely risk-free, it doesn’t mean you will lose your money. There are specific reasons why some people lose money in mutual fund investments.

Time is money: Your investments need time. You need to have an investment strategy that defines the investment term correctly. Avoid exiting because of temporary market fluctuations. Make sure that you stay invested until your complete time frame to earn expected returns.

Lack of knowledge: Many people invest in mutual funds without having sufficient knowledge about it. Understand the types of mutual fund, read about best performing mutual funds, attend investor education programs to know better about mutual fund investment.
Unable to differentiate between investing and trading: Many investors fail to realise that mutual fund requires you to invest rather than trade. Trading is generally done to achieve short-term goals from the stock market, whereas people invest money to meet their long-term goals. When you mix the two, you tend to lose money.

Greed for unrealistic returns: Some people invest in mutual funds with a specific return expectation in mind. While having an expectation is good, meeting that may not always be possible given the fluctuating market. It is wise to expect returns only as high as you are willing to take the risk. Unrealistic returns require unrealistic risk appetite and investment. It is critical to figure out how much risk you can afford to maximise your profits in mutual funds.

It is not possible to entirely avoid risk when you are investing in mutual funds, be it equity or debt. However, you can make risk tolerable by selecting the right mutual fund scheme. All you need to do is choose schemes that match your investment goals, risk profile and investment horizon. It may sound like a simplistic approach, but it has helped many investors to create wealth to meet their long-term goals.

Best mutual funds in India to invest for 10 to 15 years

Which are best performing mutual funds? Or which are best mutual funds in India? Many new entrants who want to start investing in mutual fund, begin their investment journey with a similar query.

It is advisable to invest in a multi-cap fund which invests across all market capitalisation. Invest in growth option and avoid investing in dividend option to let your investment grow over a period of time. Aggressive hybrid schemes are one of the best investment options for very conservative equity investors looking to create long-term wealth without much volatility.

Below is the list of best performing mutual funds to invest for 10 to 15 years’ horizon.

Aditya Birla Sun Life Equity Fund
Kotak Standard Multicap Fund
SBI Magnum Multicap Fund
Franklin India Equity Fund
Mirae Asset Hybrid Equity Fund
HDFC Small Cap Fund
Motilal Oswal Multicap 35 Fund
ICICI Prudential Equity and Debt fund

You may be confused and may have multiple questions when you invest in a mutual fund. However, mutual fund investments are not as difficult as it is often considered to be. All you need to do is to keep in mind a few tricks. It is important to stay active, not just at the time of selecting the best performing mutual funds, but throughout the term of the investment.