What is better? Mutual Funds or PFs for a long term?

ANSWER

Public Provident Fund (PPF) and Mutual Fund (MFs) are two such investment options available to investors in India. Mutual Fund functions as a professionally run investment pool that allocates money towards financial instruments like shares, bonds, government securities, money market instruments, gold etc

It is operated by an asset management company(AMC). Mutual funds are broadly divided into equity-oriented, debt-oriented or hybrid schemes, based on the risk appetite of the investor. The most popular method of investing in Mutual funds is Systematic investment plan (SIP). Under a SIP, one can invest a fixed amount on a regular basis in the Mutual fund scheme.

Public Provident Fund is a long-term scheme operated and guaranteed by the Central Government with the idea of instilling savings culture amongst citizens. PPF invests predominantly in fixed income securities that generate a fixed rate of return and ensure income stability. Thus by using a PPF calculator, one can compute the expected returns based on the annual investment amount.

Conclusion

In conclusion, mutual funds will be more beneficial to one’s portfolio, considering the above factors. One can avail tax benefit from both i.e. PPF as well as ELSS category of mutual funds under section 80C of the Income Tax Act, 1961.

However, mutual funds provide you the additional benefit of diversification.