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Is PPF A Better Choice Than Mutual Funds?

Updated On Dec 28, 2021

Long-term investment vehicles such as the Public Provident Fund (PPF) and mutual funds exist. PPF, on the other hand, is a risk-free debt instrument, whereas mutual funds are market-linked, and hence "mutual fund investments are vulnerable to market risk." Experts say that's mutual fund sahi hai' is a good option for high-risk investors, whereas PPF is a good option for low-risk investors.

The Public Provident Fund (PPF) is a long-term savings system run and guaranteed by the government with the goal of encouraging citizens to save.

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

PPF vs Mutual Funds : What Should I Choose?

The main distinctions between the two schemes are as follows:

  • Benefit From the Tax Code

Mutual funds are taxed differently depending on the type of plan and the length of time they have been invested in.

Under Section 80C of the Income Tax Act, 1961, PPF investments are tax-free up to a ceiling of Rs 1,50,000 each financial year. The interest earned on the PPF is tax-free as well, but it must be reported on the annual income tax return. Upon maturity, the PPF corpus is likewise tax-free. PPF, in other words, has a one-of-a-kind 'exempt, exempt, exempt' tax treatment as an investment tool.

  • Types of Investments

AMCs construct numerous sorts of mutual fund schemes with diverse portfolio mixes based on the risk profile of the client. The corpus invests in financial securities to create returns in order to meet the investors' investment objectives.

PPF is a popular savings option offered by the Indian government with the purpose of collecting funds to develop a corpus while receiving a reasonable rate of return and tax benefits.

  • Liquidity

Mutual funds have a lot of liquidity. Even for a single day, one can remain invested.

If you redeem mutual fund units within a particular amount of time, you will be charged an exit load by the mutual fund house.

Closed-ended funds with a 3-4 year investment term can only be redeemed at the end of the term.

PPFs are low-liquid long-term deposit options.The subscriber can borrow 25% of the balance at the end of the third year.

Withdrawal is only allowed after the seventh year for extraordinary circumstances.Because PPF deposits must be held for 15 years, mutual funds are more liquid in this comparison.

Risk Factor

Mutual funds are riskier than PPFs since they invest in stocks and are thus susceptible to risk. The stock price volatility of the stocks held by the fund causes the value of equity funds to vary.The value of debt funds fluctuates due to changes in bond market prices. Debt funds, on the other hand, are inherently safer and more stable. It's important to keep in mind that not all mutual funds are dangerous. There are also low-risk mutual funds.

The Public Provident Fund (PPF) is a government-backed, risk-free investment.Whether or whether PPF is a smart investment depends on your objectives. It's a safe savings option backed by the government. The government uses the money put in a PPF account for budgetary purposes, and the interest is also deposited by the government. As a result, in the case of PPF, there is a lower danger of default. Given the low probability of failure,


The choice between PPF and Mutual Fund is determined by the investment objectives or goals of the investors. One is a market-linked product, while the other is more of a savings scheme. PPF provides stable returns and is best suited for investors with a low risk appetite.

Mutual fund houses, on the other hand, invest in a variety of asset classes such as equities, debt, and bonds, including government bonds. As a result, it has the potential for higher returns, but the risk is also higher because it is market-linked.

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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