Evaluating the PPF for long-term wealth creation

Nishant (34) works with an IT company. He and his wife Srishti (32), along with their four-year-old daughter, have recently moved into a new house. Nishant wants us to advise him on investing for his retirement and his daughter's higher education and wedding. Why PPF is not great for long-term investments Nishant wants to know how good the Public Provident Fund (PPF) is as a long-term investment option. He has accumulated about Rs 4.7 lakh in it. Nishant should heed the following: PPF interest rates and those offered by other fixed-income products have reduced over time. This trend is likely to continue as the economy moves towards lower inflation. PPF is all debt. Equity tends to give much higher returns over the long term and hence helps create wealth. So it should be the natural choice for your long-term investments, not debt. While it is true that investments in the PPF up to Rs 1.5 lakh are exempt from income tax, Nishant could instead save tax by opting for a good equity-linked savings scheme (ELSS) or tax-saving fund. As against the PPF's lock-in period of 15 years, ELSS has a lock-in of only three years. This makes it more liquid and efficient. How Nishant can achieve his goals Nishant can use ELSS, Employees' Provident Fund (EPF), National Pension S

This article was originally published on June 23, 2021.