Should one continue to invest in Sukanya Samriddhi Yojana?

Should one continue to invest in Sukanya Samriddhi Yojana (SSY) or is it advisable to move to ELSS?
- Kishan Tantiya

If someone is living in a village and has difficulty investing in mutual funds, Sukanya Samriddhi Yojana (SSY) is a good idea. SSY is the highest yielding guaranteed fixed-income alternative and is available at all post offices. It is a 15-year plan for your girl child, specially designed by the government and gives you a little more return than even PPF. But despite that, if you are investing for 80C, your investment in ELSS over the next 15 years will get you the same tax break and the return will be substantially more. It could be twice as much.

So, if you keep investing Rs 1 lakh in SSY and keep doing your accumulation in ELSS by Rs 1 lakh every year, the money that you will have in SSY after 10-15 years will be just half of what you will accumulate in ELSS. Even if you have chosen a poor ELSS, it might be 60- 70 per cent at best. So, one must do ELSS with this thing in mind because your risk gets substantially reduced when you are investing in equity for 10-15 years. On the other hand, it is very risky if you are investing in equity for two-four years. With such a short time frame, don't invest in ELSS for such an important objective. But if it is for 15-18 years, by all means, invest only in ELSS. That's the way to look at it.

This article was originally published on August 17, 2021.