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Where should I invest the maturity proceeds of PPF meant for children's education?

Dhirendra Kumar advises doing an overall assessment of your asset allocation at first

I have a PPF account maturing in the near future and would need the money only after ten years for the education of my children. Should I opt to extend the PPF account by five years or invest the proceeds in mutual funds?
- Pawan

I don't know if you can invest your money which was getting invested in PPF in equity. Normally, I don't recommend that one should invest in PPF for long. But PPF definitely comes with its own advantages, especially if you have already accumulated it. This is because the return from PPF is completely tax-free. So, think of a person who opened a PPF account because say his grandfather asked him to and now the accumulation has become something meaningful. Now, after 15 years, it is generating income, which is completely tax-free. So, this is the finest fixed income generator - risk-free and highest yielding on a post-tax basis for an investment.

So, if you have some asset allocation in mind, consider PPF as your fixed income allocation. However, if this is the only investment, then I would say that make your money grow faster. This is because while PPF will only grow at 8 per cent currently, elsewhere your money will grow more. To put it in a nutshell, from an asset allocation standpoint, it makes sense to retain PPF. But if this is the only money and there is no incremental investment, then consider moving it to mutual funds.


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