Design Credits: Rakesh Mohan
When it comes to long-term investments with good returns and tax-saving benefits, Equity-Linked Savings Schemes (ELSS) and Public Provident Fund (PPF) are probably the two most popular investment options.
Let’s learn a little more about PPF and ELSS. It will help you make an informed decision when investing.
|Factors||PPF Account||ELSS Schemes|
|Investment pattern||PPF invests in government bonds and these are backed by the Central Government of India.||ELSS invests your money in the share market. It is an equity Mutual Fund investment.|
|Risk factor||PPF is a government sponsored scheme and hence it’s considered to be a safe investment.||The risk level is comparatively higher in ELSS and there is no guarantee of principal safety in this scheme.|
|Returns||The PPF investment returns are pretty fixed, as you get a fixed interest and principal amount on maturity.||ELSS returns are completely dependent on share market performance and cannot be guaranteed.|
|Liquidity factor||PPF typically has a lock-in period of 15 years. You can do a partial withdrawal after five years but overall it’s a long-term investment.||ELSS schemes typically have a lock-in period of three years. You can choose to reinvest after that period.|
|Tenure||PPF accounts have a minimum tenure of 15 years, after which you can increase it in a block of five years.||The minimum tenure is for three years. Post that, the tenure completely depends on you.|
|Online transactions||Only some banks have an online facility for PPF accounts. Also, first-time investors need to personally visit the branch to open the account and for document submission.||ELSS investments can be done completely online. You can invest or sell ELSS funds any time through an online transaction.|
|Investment limit||You cannot invest more than Rs. 1.5 lakhs in a year in a PPF account.||There is no such restriction on the investment limit in an ELSS scheme.|
An ELSS investment is good if:
- You have a high-risk appetite.
- You are able to invest a good amount of money for several years.
- You have a good understanding of the share market.
- You aren’t on the verge of retirement.
A PPF investment is good if:
- You are averse to risk taking and prefer maximum security with regard to investments.
- You can invest and wait for 15 years to get returns.
- You can invest a certain amount regularly.
- You are nearing retirement.
Additional Reading: What you should know about PPF
If you are still unsure about which option to invest in, why not balance your investments between the two?