POSTED BY February 28, 2014 10:21 am COMMENTS (3)ON
As I am earning through consulting apart from the salary. I get to invest 60,000/-INR yearly into savings . I have long term goals of travelling across Asia and for that I want to save. I want to know which is good FD, MF or PPF. I don’t want to touch the savings in the PPF. Also I am not much aware of the MF so I would like to know which is a good option for me.
Also anyone have any sources to understand MF for totally clueless? I want to know the dumbdown details like how to withdraw after maturity of MF etc. if that is my option.
For now, I want to know if there is a good option to save my money?
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3 replies on this article “Where to Invest FD, MF, PPF or Any other option?”
Savings play a significant role in our lives, whether for retirement or an unexpected need. India has been known as a saver for decades. The majority of us want to keep our expenses lower than our earnings in order to put as much money as possible into savings, where it can be invested wisely and eventually develop into a much larger sum. Fortunately, there is a wide variety of solid investment opportunities available to us.
Funds in a PPF or an FD will become fully invested after their maturity or lock-in period.
The duration of an FD can be adjusted at will. The range is between 7 days and 10 years. The 5-year commitment is required just for tax-deferred FDs. If that’s the case, they can tailor their investment term to their specific monetary goals.
Conversely, PPF requires a commitment of 15 years. After six years have passed from the end of the year in which the initial investment was made (i.e., from the seventh year), however, partial withdrawals may be made. Further, you can only withdraw the lesser of either half of your account balance at the conclusion of the fourth fiscal year or half of your account balance from the year before. They provide less leeway for making investments than FDs.
PPF Loans vs. FD Loans
Allow me to contrast the availability of loans from PPF and FD:
Fix Deposit: here is no time limit on taking out a loan against a fixed deposit. Some of the best banks can lend you up to 90% of your fixed deposit amount. Loans secured by fixed deposits allow banks to recoup their losses in the event of default by borrowers.
PPF: It’s important to remember that you can’t get a loan against your Public Provident Fund until you’ve had the account open for at least three full fiscal years. The maximum loan amount is capped at 25% of the PPF account balance as of December 31 of the year prior to the loan’s application. The loan can be repaid in as little as 24 EMIs and as many as 36 EMIs over the course of 36 months. If you pay off your first loan by the end of the sixth fiscal year, you’ll be eligible to apply for a second loan.
Which Is Better, an FD or a PPF?
For those who would like not take any chances on their money, FD and PPF are two excellent choices. People who want to invest for the future while also minimizing their tax liability often choose the PPF. The security it offers is unparalleled because it is backed by the government. The fact that interest accrued is not subject to taxation is an additional perk. However, there is a severe withdrawal restriction and a long lock-in period beginning in the seventh year.
Funds for deposit, on the other hand, are easier to access and allow you to choose your own duration. The lock-in period for the tax-advantaged FDs is only 5 years, which is significantly shorter than the PPF’s 15-year requirement. However, the interest you earn on a fixed-income investment (FD) is taxable, and there is some risk involved.
Dear Mahesh, PPF should be used as long term wealth creator for your retirement. It should be not be used for the purpose you are referring to. Regarding MFs and FDs, please read previous articles and discussions here in the forum and you ‘ll learn a lot.
To understand the basics of mutual funds, go through the videos in below link
Also, read all the articles by Manish on Mutual Funds.
After that, go through the questions asked in this forum under ‘Mutual Funds’ so that you will clearly understand about Mutual Funds.
FDs are always safe and secure with liquidity, but tax is applicable on the returns. So, choose whether to invest in FDs or not.