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Detailed Comparison Between PPF and Mutual Funds

Updated On Dec 30, 2021

The Public Provident Fund (PPF) and mutual funds are examples of long-term investment vehicles. PPF, on the other hand, is a risk-free debt vehicle, whereas mutual funds are market-linked and hence "subject to market risk." According to experts,'mutual fund sahi hai' is a suitable option for high-risk investors, while PPF is a good alternative for low-risk investors.

The Public Provident Fund (PPF) is a government-run, government-guaranteed long-term savings programme designed to encourage citizens to save.

A mutual fund is a professionally managed investment pool that, among other things, invests in stocks, bonds, government securities, money market instruments, and gold. PPF is managed by the government.

What Should I Do If I Can't Decide Between PPFs and Mutual Funds?

The following are the key differences between the two schemes:

  • Use The Tax Code To Your Advantage

Mutual funds are taxed differently based on the type of plan and how long they have been held.

PPF investments are tax-free up to Rs 1,50,000 each financial year under Section 80C of the Income Tax Act, 1961. PPF interest is also tax-free, although it must be disclosed on the annual income tax return. The PPF corpus is tax-free when it matures. PPF, in other words, has a one-of-a-kind tax treatment as an investment tool: 'exempt, exempt, exempt.'

  • Investing Types

AMCs create a variety of mutual fund schemes with different portfolio mixes based on the client's risk profile. The corpus invests in financial instruments in order to generate returns and meet the investment goals of the participants.

PPF is a popular savings option offered by the Indian government with the goal of gathering funds to build a corpus while earning a respectable rate of return and gaining tax benefits.

  • Liquidity

Liquidity is plentiful in mutual funds. One can remain invested even for a single day.You will be charged an exit load by the mutual fund house if you redeem mutual fund units within a certain amount of time.

Closed-ended funds with a 3-4 year investment duration can only be redeemed when the term expires.

PPFs are long-term deposit options with a minimum liquidity requirement.By the conclusion of the third year, the subscriber can borrow 25% of the remaining sum.

Only in exceptional situations is withdrawal permitted after the seventh year. Mutual funds are more liquid in this comparison than PPF deposits, which must be kept for 15 years.

  • Factor of Risk

Due to the fact that mutual funds invest in stocks, they are more risky than PPFs. The value of equity funds fluctuates due to the stock price volatility of the stocks held by the fund. Due to changes in bond market prices, the value of debt funds fluctuates. Debt funds, on the other hand, are safer and more stable by definition. It's crucial to remember that not all mutual funds are risky. Low-risk mutual funds are also available.

The Public Provident Fund (PPF) is a risk-free investment backed by the government.

Whether or not a PPF is a good investment is determined on your goals. It's a government-backed safe savings solution. The money put into a PPF account is used by the government for budgetary purposes, and the interest is likewise deposited by the government. As a result, the risk of default is decreased in the case of PPF. Given the situation,


The investors' investment objectives or goals dictate whether they should choose a PPF or a Mutual Fund. One is a market-linked product, and the other is a savings plan. PPF offers consistent profits and is best suited for low-risk investors.

Mutual fund houses, on the other hand, invest in a wide range of asset classes, including stocks, bonds, and government bonds. As a result, it has a bigger potential for higher returns, but because it is market-linked, the risk is also higher.

Also read: 

Should I Choose Life Insurance Over PPF?

Should I choose PPF or ELSS?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.


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