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?
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Sir I think PPF renewal is for a term of 5 years after the initial 15 year term .You had mentioned it as 3 years .Just for updation of iinfo.Please correct me if am wrong.
Hi K Kannan,
Thanks for writing to us. Yes, you are right. For PPF, you can keep extending the deposit term by a period of 5 years at a time. For ELSS schemes, the minimum lock-in is for three years. Post that, the tenure completely depends on you.